It's that time of the year again. Millions of people will make a New Year's resolution. Most will slowly forget that promise as the year drags on.
For the many people who will make a promise to fix their finances in 2014, I have three very simple steps to make sure you stick to your plan.
1. Pay yourself first
This is, single-handedly, the best way to get your personal finances back on track. Save first.
It sounds simple because it is. Out of every paycheck, bonus, or $0.50 you find in your couch cushions, force yourself to save a set percentage of each windfall.
It doesn't have to be much. Small amounts over large periods of time add up fast. For instance, if you simply save 2% of every paycheck, you'd have a full week's pay by the same time next year. Save 8% and you'll have a full month's earnings in just one year.
Better yet, automate the process. Most banks have an online banking platform which will allow you to make routine, automated transfers from checking into savings. By automating the process, money will accumulate without any input of your own -- out of sight, and out of mind.
2. Focus on the big things
Saving $0.50 on a roll of aluminum foil won't make or break you. Focus on the big, repeatable expenses. Cable is an easy one -- a single phone call can often result in a $20-$30 savings each, and every month if you ask politely for a lower rate. Optimize your cell phone plan to fit the minutes, texts, and data you actually consume.
For those who carry debt balances, kill them off. Credit cards should be paid off first. I can't speak for every Foolish investor at The Motley Fool, but you can bet most of us would love a guaranteed return of 12%-29% on our money each year. That's exactly what paying off a credit card is -- a guaranteed return on your money.
3. Open a retirement account
Retirement planning is daunting, especially if you feel like you don't have a dime to invest. But, again, small amounts of money add up quickly. And opening a 401(k) or IRA can take as little as 30 minutes.
Seriously -- 30 minutes. Just last week, I helped a friend simultaneously open, close, and transfer a 401(k) during a single quarter of an NFL football game. By all projections and estimations, he'll likely retire a millionaire, just for taking 30 minutes out of his day.
The Foolish bottom line
Most personal finance tasks appear more challenging than they actually are. An hour on the phone could save you $500 per year on your cable and cell phone plan. As little as 30 minutes' time could have you ready for retirement.
In 2014, set aside two hours. Go through as many financial challenges as you can. In that time, you can slash expenses, make a budget, and have a plan to make 2014 your best year yet. Go forth, take action, and crush your New Year's resolution.
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