Start the New Year with practical money tips - KWWL - Eastern Iowa Breaking News, Weather, Closings

Start the New Year with practical money tips

Financial Tip of the Week from the Iowa Bankers Association:

With 2010 just around the corner, you may be contemplating your goals for the New Year. For many Americans, New Year's resolutions involve losing weight, getting more sleep or spending more time with family friends. Hopefully your resolutions for 2010 also involve your money and your financial future. The dawn of a New Year – and a new decade – is the perfect time to examine your personal finances and set realistic financial goals. Be sure to make these practical money tips part of your New Year's resolutions:

  1. Pay yourself first. If you want to build wealth, start the New Year with a commitment to paying yourself first. Before you pay your bills, allocate a portion of your income to go directly into your savings account, mutual fund or retirement account. You can make the process easier by having an amount automatically deducted from each paycheck. Paying yourself first is an investment in your future, and now is the time to get started. Even if you start with a small amount each month, your savings will continue to grow over time.
  2. Establish an emergency fund. Are you prepared for the unexpected? As you save for the future, be sure to set aside a portion of your savings to create an emergency fund (generally enough money to pay all of your living expenses for three to six months or more). This money should be easily accessible so it can be tapped in case of an emergency—unexpected car repairs, medical expenses or temporary job loss.
  3. Develop a spending plan that works for you. Do you know where your money went in 2009? Start the New Year by tracking your expenses and calculating the difference between your income and expenses. Then take control of your finances by developing a realistic spending plan that works for you. If you're technologically savvy, you may prefer using one of the many online budgeting tools or personal finance software options available. If you prefer a simpler method, consider using the age-old envelope system. The challenge is to find a system that works for you.
  4. Manage your discretionary spending. Your spending plan will include fixed costs that are the same each month (rent/mortgage payment, utilities, car payment, etc.). The rest of your income is considered discretionary income, and you control how that money is spent. If your financial goals involve spending less, you'll need to make a commitment to managing your discretionary spending. This comes down to identifying "needs" and "wants." Start the New Year by analyzing your expenses, and you'll probably find that some "wants" are luxuries that you can cut back on – or live without completely. These expenses could include magazine subscriptions, fitness memberships, fast food, lottery tickets, dry cleaning, cable television, pizza delivery or dining out at restaurants. If you can reduce your monthly expenses by just $50, you'll save $600 each year.
  5. Use credit cards with caution. Credit cards are convenient and easy to use, but they can also lead to financial disaster. Many Americans who have credit card debt don't realize how quickly that debt can grow out of control. If you're unable to pay your bills in full each month – or if you're using credit cards out of necessity rather than convenience – you need to stop making purchases and adjust your spending plan find ways to reduce your expenses.

These financial tips are provided by the Iowa Bankers Association (IBA), representing banks and thrifts in the state. For more information go to

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