Most people make New Year’s resolutions each year. Two that top the list: eat better, exercise more. But what are some of the most popular New Year’s resolutions for personal finance?
1. Start a retirement plan. According to the Employee Benefits Research Institute, 27 percent of American workers have less than $1,000 in a retirement account. An easy way to start is by having a percentage of your paycheck deposited directly into a retirement account whether you open an IRA, 401K, or other retirement account.
2. Build an emergency fund. If you are starting from scratch, aim for $1,000. Use this money when your car breaks down or other small emergencies. After you save the initial thousand, set a new goal of saving three months of living expenses.
3. Set up a college fund. Parents are concerned about the growing cost of higher education. State sponsored 529 plans allow you to save for college and shelters the funds from federal and state income taxes.
4. Make sure you are properly insured. For many employees, the new year is the time to review your medical, life, and disability insurance plans. Consider your expenses over the past year to determine if you need to switch medical plans. A high deductible plan is great for healthy people who rarely visit the doctor. A more traditional plan such as an HMO or PPO is usually the better choice for people with health issues.
5. Finally, one of the most common New Year’s resolutions for personal finances is to get out of debt. Many people prioritize their debt payments based on either interest rate or total amount due. They pay the most on their first priority debt, and work their way down the list.