It's a New Year: Time to Clean Up Your Finances

Each new year, many of us make resolutions.  Some we keep, but most quickly go by the wayside.  One resolution that you should make, and keep, is to clean up your finances and put yourself on the road to financial security.

Debt Reduction:  If you keep no other resolution this year, make debt reduction one of your priorities.  Get a handle on your income and expenses through a budgeting process, then figure out how you can put extra money on your highest interest debts. 

Budgeting - use free tools available on the internet.  My credit union offers MoneyDesktop through our online banking and a simple software program called BudgetSmart.  Put every extra cent you can manage on to your debt, starting with the highest rate debt first and then working your way down.

Refinance - if you can reduce your interest rate, debt will pay off faster.  Look around for lower rate loans and credit cards (watch out for balance transfer fees on credit cards - don't choose a card that has that type of fee).  If you belong to a credit union, chances are, they can refinance your mortgage, home equity, car, credit card and personal loans at a lower rate than you are paying outside.  If you don't belong to one, come and see Destinations!

Take a look at alternative payment methods, such as bi-weekly or bi-monthly payments.  Paying more often reduces your principal balance more quickly, resulting in the loan being paid off faster.

Automate - use tools such as direct deposit/payroll deduction, automatic transfers at your financial institution, and online bill payment to automate as much of your financial life as possible.  It makes it much easier to pay your bills on time without much thought.  While you're at it, direct at least a small amount into a savings account - it's much easier to save when you don't touch the money first!

I welcome your comments!  Please share if you have a tip on how to get out of debt and manage your financial life.