Celebrating The
New Year!

It's a new year! It's a time for new beginnings, a time to quit your old bad habits and change for the better. As with dieting, exercise and other New Year's resolutions, financial resolutions are not always easy and they certainly aren't fun. But you'll reap the rewards for years to come.



What components of your personal financial plan need updating or improvement this year? For some of you, this new year might be the year you establish a financial plan for the very first time. Where do you start? To help you begin, here's a checklist of the most important components of a personal financial plan.

Household Budget

Establishing a household budget (and sticking to it) can help you avoid overspending and unnecessary credit usage. If you carefully take a look at your monthly expenditures, you may be surprised to find out where all the money goes.

Resources for establishing your budget:
Tips for shopping on a budget
6 Ways to take charge of your family's finances

Property and Liability Insurance

You should take a careful look at your auto and homeowner's insurance at least once a year. Make sure you're carrying more than the minimum liability limits for auto insurance. Be sure that your homeowner's limits have kept pace with the increased value of your home. If you're a renter, consider buying renter's insurance - it's very affordable and can save you a bundle in the event of a theft or if you're sued for an injury on your premises.

Emergency Savings

How long could you manage to pay your bills if you were temporarily out of work? As a general rule of thumb, you should have enough funds to keep your household afloat for 5 to 8 months. It doesn't have to be cash in the bank - a credit line or short-term investments that can easily be sold to generate cash can also serve this purpose.

More advice on establishing savings:
5 Rules of saving
5 Things you need to know to survive a recession

Credit Management

American household finances would be a lot healthier if not for high-interest credit cards. While "plastic" is certainly more convenient than carrying cash, the money you spend on interest could be put to much better use. Credit reform this year will require the minimum payment on credit cards to include a little more repayment of the outstanding balance than previously was the case. But your New Year's resolution on credit should go further - make it your goal to pay off high-interest accounts.

Resources for getting your credit back on track:

How to get out of credit card debtTop 5 awys to get out of debt

Wills and Life Insurance

If you have dependents, you should have a plan for protecting them from financial hardship in the event of your death. A surprising percentage of American adults do not have valid wills in place. If you're one of them, this is a serious oversight and should be handled immediately. Even if you don't have much in the way of wealth or assets to transfer, you need to designate someone as guardian for your children. You should also have sufficient life insurance to meet their financial needs. The cheapest alternative is term life insurance.

Resource for insurance:

Life insurance guide for new parents

Retirement Plan

Take advantage of employer-sponsored opportunities for tax-deferred saving. If you don't have an employer retirement plan, consider starting an Individual Retirement Account (IRA).

More help for establishing your retirement plan:

How to make sure your retirement plan is on track

Saving and Investment

If you've got everything else in place, then you can begin to think about establishing a plan for building your wealth through saving and investing. Depending on where you are on the other items, don't feel bad if this goal gets put off until next year.

Another resource to kick-startyour savings:

10 Expert tips on spending & saving




Want more financial advice before you make your financial resolutions?
Visit SheKnows Money & Finances

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