New Year’s resolutions typically involve losing weight, but here’s another idea: Why not plan to get your finances into shape, too?
To set yourself up for success, break down each goal into manageable portions. Focus first on short-term fixes, then work on longer-term goals. You may find that getting your finances in shape this way is a whole lot easier than swearing off fries.
For the short term: Wipe out credit-card balances. Pay as much as you can on your highest-rate card each month, and the minimum on the others. When the first card is paid off, start on the next-highest interest rate card. Repeat until your credit-card debt is history.
For the long term: Target your mortgage. Consider your mortgage payments relative to your income as you near retirement. You may wish to pay off the mortgage or downsize and although rates have been rising, you may still be able to cut your mortgage debt by refinancing. You can also make extra payments toward your loan principal.
For the short term: Consolidate your accounts. Bringing your accounts together at as few financial institutions as possible has many advantages. For one, less paperwork and with all of your money in one place, required minimum distributions from IRAs will be easier to calculate. Also, your bigger total balances should entitle you to reduced fees and more personalized service.
For the long term: Sock away more for retirement. You might find boosting your retirement savings rate from, say, 7% to 15% difficult or even impossible. But nudging it up to 9% probably isn’t. Putting your extra savings into your 401(k) plan, if you have one, is the best place to start.
See this entire article in the January 2014 issue of Consumer Reports magazine. Contact us for advice on your personal situation.