New Year's Financial Resolutions

First off, I think New Year's Resolutions are dumb. I mean, if you are going to make changes in your life, why not do them now instead of waiting for a new year? But, I also understand the purpose of starting with a clean slate and since most of you are in the mood to make changes, why not consider some of the following regarding your personal finances:

1. Save at LEAST 10% in your 401K.

2. Open a Roth IRA for you and your spouse and set up automatic deposits into the account. You can put $3,000 in a Roth IRA for the 2004 tax year (you have until April 15th, 2005 to make a contribution for the 2004 tax year). In 2005, you can put up to $4,000 in a Roth IRA. If you can't afford to put money in a Roth AND 10% in your 401K , consider adjusting your 401K contribution so that you CAN utilize a Roth.

3. Have a budget. It doesn't have to be detailed. Just make sure that you have a written plan as to HOW you spend your money. If you make a budget and find out that you don't have enough for all your needs, then you might have to be a little more detailed to find out where you are spending too much money.

4. Set up an emergency fund. Most people say 3 to 6 months of your income should be in an emergency fund. An emergency fund is an excellent tool. Once you have money set aside in your emergency fund, you can consider upping your deductibles on your car and homeowner's insurance, which will save you on your monthly payment. Then, if you do have an accident or have to pay a deductible, you can take money out of your emergency fund.

NOTE: An emergency fund should NOT be accessed to buy a new pair of shoes! It should be considered a sacred account and should only be used in the event you lose your job or have to pay a deductible.

There are many other things you can do to improve your personal finances. I have just mentioned a few. But, I think it is best to concentrate on a few so that you don't get overwhelmed.

Have a great 2005!