Financial Resolutions for the New Year

Did you make a New Year's resolution for 2017? You're not alone if you did. Two-thirds of Americans make a New Year's resolution, but just 8% of Americans are successful in achieving it. Financial resolutions are one of the most popular types of New Year's resolutions people make, and in the spirit of helping you join the successful 8%, here are some financial New Year's resolutions you can make in 2017 as well as some advice that can help you succeed.

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Get your credit card debt under control

There's a reason I listed this one first, before anything having to do with investing or saving money. Quite frankly, it doesn't make sense to do either of those things if you have high-interest credit card debt.

Think of it this way. Let's say that you have $5,000 in your checking account and want to invest. The best returns you can reasonably expect to earn on a sustainable basis are in the ballpark of 10% per year. So, if you invest, you could reasonably expect your account to gain $500 in the first year.

However, if you have $5,000 of credit card debt at 18% interest, you're paying interest at a rate of $900 per year just for the privilege of owing money. In other words, by choosing to invest instead of paying down your debt, you're setting yourself up to lose $400 this year, in this case.

For that reason, if you have high-interest credit card debt, make 2017 the year you aggressively start to pay it down. It may be a good idea to consider a card with 0% balance transfers, such as the Chase Slate, so that 100% of the money you're paying goes toward the principal.

Maximize your credit score

If you have bad or just "OK" credit, it could be a good idea to resolve to get on track in 2017. Or, if you already have good credit, resolve to make 2017 the year you make the leap to excellent credit.

First, when it comes to FICO credit scores, here's a general guide to help determine where you stand:

There are many ways you can maximize your credit score, and here are a few suggestions to get you started:

• Obtain a copy of your credit report and check it for errors. You can do this absolutely free, once a year, for all three credit bureaus at www.annualcreditreport.com. Millions of credit reports contain some type of errors, and a mistake on yours could be hurting your score.
• 30% of your score comes from the amounts you owe. So, paying down your credit cards as I discussed above is one of the most effective ways to boost your score.
• Only apply for new credit when you need it. Too many credit inquiries and newly opened accounts can be a negative factor. In fact, this can affect both the new credit (10% of your score) and the length of credit history (15% of your score) categories.
• If you don't have a credit card, consider applying for one, even if you don't plan on using it much. Ten percent of your FICO score comes from your credit mix. In other words, lenders want to see that you can be responsible with all types of credit.

Build an emergency fund

Experts generally suggest that you keep six months' worth of expenses in an emergency fund, but this can be a great deal of money. Most Americans never get close to this -- in fact, about half of American adults couldn't cover an unexpected $400 expense without borrowing the money or selling something. So, let's look at a goal you can actually achieve in 2017.

According to WalletHub's report of the best financial New Year's resolutions for 2017, a good goal is to add one month's pay to your emergency fund this year. In other words, if you earn $60,000 per year, aim for an emergency fund of $5,000 by the end of 2017.

As the report says, "This will help protect you from incurring more debt if hit with a minor emergency expense. And once you've adjusted to this new component of your budget, you can gradually start socking away more and more." In other words, this year you aim to save one month's salary -- and next year you can increase your savings rate. If you stick with it, you'll have the recommended six months' worth of expenses in the bank before you know it.

The best way to achieve this is to make it an automatic process. For example, if you get paid biweekly, a $5,000 emergency fund translates to about $192 per paycheck. You can set up your bank account to automatically transfer money into savings on every payday.

Start investing

Notice that this one is after debt reduction, credit repair, and building an emergency fund. There's a good reason for that. First, it doesn't make sense to invest and hope to earn returns of say, 10% per year, on your money when you're paying a credit card company 16% or more. Second, credit repair should be a priority, as a higher credit score can literally save you hundreds of thousands of dollars in interest charges over the years. And finally, there's no sense investing if you're not prepared for a minor emergency expense -- you'll just have to raid your investment account if anything unexpected comes up.

Assuming all that is taken care of, make 2017 the year you finally start investing at the rate you should. Boost your 401(k) contributions or open an IRA and max it out. Here's some advice that can help you maximize your retirement nest egg:

5 IRA Investing Tips That Could Earn You Thousands

3 401(k) Tips That Could Earn You Thousands

Work on your physical health, and your financial health will follow

I've been saving the most important financial resolution for last, and you may be surprised to see a health-related resolution in a financial article.

There are several good reasons for this, and to name just a couple:

• According to the WalletHub report I referenced earlier, the average person spends $4,342 on healthcare per year -- about 8% of his/her total expenses. Being in better health can result in below-average expenses, which translates into more money to invest, pay down debt, or build your emergency fund.
• A separate WalletHub report found that people who exercise frequently have the best credit scores. There are several potential reasons for this, but in general, the healthier you are, the better you feel. And feeling better can lead to smarter decisions.

So, if your New Year's resolution involves a healthier diet or new exercise program, it may help you to know that you won't just be lowering your cholesterol, shedding those unwanted pounds, or getting into better shape. You could also improve your financial health as a bonus.