Let's be honest: New Year's resolutions often don't work. The main reasons resolutions are abandoned is because they're overly complicated or people don't see tangible results when they hope to. This goes for financial resolutions, too. Fidelity Investments' annual New Year Financial Resolutions Study found that one-third of Americans plan to make a financial resolution this year, with the top three being to save more, pay down debt, and spend less in 2019. However, the same survey found that more than half (58%) of people blew their financial resolutions from last year.
Here are five easy financial resolutions that everyone can make and stick to.
1. Consolidate debt
Debt consolidation can be easy to accomplish and provides a number of immediate and long-term benefits. These include providing you with a single loan and one monthly payment, rather than several loans and payments, and a lower interest rate. Debt consolidation can be accomplished in a number of ways, including through a low-interest balance transfer credit card, a personal loan, or a Home Equity Line of Credit (HELOC) that uses your house as collateral. You can also refinance your home, take out a second mortgage, or even take a loan from your 401(k) -- though this last option is hazardous and should generally be a last resort.
Be mindful, though, that debt consolidation is an industry, and there are a number of organizations that take advantage of people who have precarious finances, charging up-front fees without providing the promised loan. Even some legitimate debt consolidation companies charge hefty fees for their services. When possible, deal with a reputable bank. You should also review the advice provided by the Federal Trade Commission before taking out a debt consolidation loan with any organization.
2. Cancel a credit card
Most Americans who use credit cards own three of four of them, according to management consulting firm Gallup Inc. And financial experts say that's too many. Most people only need one credit card -- preferably for emergencies. Yet credit cards remain a big source of Americans' debt, with the average family owing $15,519 on credit cards, according to National Debt Relief. And the problem with credit cards is that they tend to charge the highest interest rates at an average of 15%.
Reducing the number of credit cards you own, and owe money on, is a great financial move. And it's fairly easy to accomplish. Pay off the credit card with the highest interest rate first, and once the balance owed is at zero, cancel it. Do this until you're left with one credit card that charges the lowest interest -- ideally a balance transfer card that charges a 0% annual percentage rate (APR). But beware that most balance transfer cards charge a low APR for an introductory period that typically ranges from six to 18 months. Fail to pay the balance on the credit card in full within the introductory period, and you could get hit with a much higher interest rate.
Lastly, if you have a credit card that has not yet been activated, seriously consider cutting it up and throwing it in the trash.
3. Automate your savings
Literally one of the easiest steps you can take to improve your finances is to automate your savings. Arrange to have contributions to your 401(k) or IRA made automatically on the days you get paid. This will ensure that you're saving regularly throughout the year without any thought, effort, or opportunity to spend that money. And once you adjust to your automatic saving plan, you'll stop missing the money that comes out of each paycheck.
Automating your savings is so easy and beneficial that it has almost become a cliché among financial advisors. Yet saving for retirement continues to be a challenge and a worry for most Americans. More than three-quarters of people (78%) surveyed for Northwestern Mutual's 2018 Planning & Progress Study said they're "extremely" or "somewhat" concerned about not having enough money for retirement. And one in five Americans (21%) currently have no retirement savings. Fortunately, automating your savings has never been easier. There are even a number of apps that can help, such as "Tip Yourself" and "Empower Finance." You can even start saving as little as 1% of your pay and arrange for the amount you're saving to increase automatically over time.
4. Improve your financial literacy
Improving your financial literacy can be as easy as reading a book or a website such as this one. The subject of finance can be a little dry, but with an ever-growing number of people responsible for their financial well-being and retirement security, there has never been more information available on the subject of personal finance. And you don't need to strain your brain trying to understand the minutiae of tax law. There are a number of well-written and accessible books that can help you improve your financial acumen. Some of them you may even find entertaining. These include classic books that have stood the test of time, such as The Wealthy Barber by David Chilton, Rich Dad, Poor Dad by Robert Kiyosaki, and The Intelligent Investor by Benjamin Graham, which Warren Buffet -- arguably the most successful investor ever -- has called "the best book on investing ever written."
5. Read your credit reports
Your credit score is important. It helps determine whether you qualify for a mortgage or credit card, as well as the interest rate you'll be charged on a loan. Yet nearly half of Americans (44%) did not check their credit score in the last year, according to the National Foundation for Credit Counseling (NFCC). The percentage of people who don't know their current credit score is even higher among people under age 30. But checking your credit score is both free and easy. There are three credit bureaus (also known as credit reporting agencies) in the U.S.: Equifax, Experian and TransUnion. And they will each give you a copy of your credit score and credit report once a year for free. You can request this information by going to website AnnualCreditReport.com. This information will help you understand where you stand financially and where you should make improvements. You can also check for errors on your credit report, and resolving any errors may save you money, improve your credit score, or protect you from fraud.
Financial resolutions needn't be difficult to stick to. By keeping your financial improvements simple and easy, you can ensure that you stay with them, and benefit from them, over the long term.