Make Some Financial Resolutions -- And Stick To Them


If you make a New Year's resolution, and you don't follow through on it, what are the consequences? It all depends.

If you vow to learn French but never get past "Oui, mademoiselle," your life will probably go on as before (unless, of course, you're moving to France).

If you make some financial resolutions and abandon them, you could fall short of your long-term goals -- such as a comfortable retirement.

Consequently, you'll want to set reasonable and attainable financial resolutions -- and then discipline yourself to achieve them.

What sort of resolutions might you make?

Consider the following:

Boost your 401(k) contributions this year -- and every year thereafter. If your employer offers a 401(k) or similar retirement plan -- such as a 403(b) or 457(b) -- take full advantage of it.

Your earnings have the potential to grow on a tax-deferred basis, and because you typically make pre-tax contributions, the more you invest, the lower your annual taxable income.

Furthermore, you may have a dozen or more investment options within your plan, so you can tailor your choices to reflect your individual risk tolerance, goals and time horizon.

If your salary rises every year, increase your 401(k) contributions at the same time.

Since the money will automatically be deducted from your paycheck, you shouldn't find it hard to keep this financial resolution.

IRA contributions

Contribute the maximum amount to your IRA.

Your traditional or Roth IRA can be a key part of your retirement savings.

A traditional IRA can potentially grow tax-deferred, while a Roth IRA's earnings have the potential to grow tax-free, provided you don't take withdrawals until you reach age 59-1/2 and you've held your account at least five years.

Unfortunately, many people don't fully fund their IRAs because they're intimidated by the contribution limits ($5,000 per year for 2008, or $6,000 if you're over 50).

But there's no need to fund your IRA all at once; you can contribute to it incrementally. Why not write a check to your IRA each time you get paid or, better yet, have the money automatically sent from your checking account? Again, it will be easier to keep this resolution if you don't have to work at it.

Be prepared

Build an emergency fund. This resolution may take a bit more effort, but it's worth it.

If you can put away six to 12 months' worth of living expenses in a liquid account, and use the money only for emergencies -- car repairs, unexpected doctors' bills, etc. -- you may be able to avoid dipping into your investments to pay for these costs. And the less you tap into your investments, the better.

Cut your debts

Here's another resolution that sounds simple but can be difficult to achieve. Yet every dollar that doesn't pay a debt can be invested toward your future.

In 2008, look for ways to cut your costs, and strive to live within your means.

See a professional

If you've never worked with a financial adviser, make 2008 the year to start.

A qualified financial adviser can objectively evaluate your situation and suggest appropriate financial strategies for helping you achieve your long-term objectives.

By following these resolutions in 2008, you can help position yourself for financial success -- for many new years to come.

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