Start a financial resolution

This was originally published on Monday, December 28, 2015, in the Pacific Daily News.  Click here to subscribe to the PDN.

In just a few days we will be ringing in 2016. In following tradition, many of us take this time to reflect on the years past and create New Year’s resolutions. Whether your financial situation was enhanced or looked bleak in 2015, the start of the year is the perfect time to create your financial New Year’s resolution.

In the past few weeks, I’ve discussed what areas to review before the year’s end. Take what you have discovered and create your financial goals for 2016.

  • Pay down debt. This is probably the most popular personal finance goal. Challenge yourself to pay off your debt. It takes some work but in the end, it’s worth it. The longer you have the debt the more you pay on interest. Paying more than the monthly minimum payment will greatly reduce how much interest you pay. For example, if you have a $5,000 balance with a 13% interest rate and $100 monthly minimum payment, it will take you 6 years and 1 month to pay off your debt and you would have paid $2,241 in interest. If you increase the payment to $150 a month, it will take you 3 1/2 years to pay off your debt and you would pay $1,237 on interest. You would pay off your debt in half the time and save yourself about $1,000. There are free credit card repayment calculators online to help you compute how long it will take you to pay off your debt and how much interest you will pay.
  • Emergency fund. Because life never goes as planned, it’s a good idea to create an emergency fund. A general rule is to have in savings at least 3 to 6 months of income. Keep this fund separate from your regular checking and savings account. Unexpected events such as a job loss, medical emergencies, and car repairs can be stressful and costly. An emergency fund will create a safety net that will reduce the need to use a high interest credit card.
  • Retirement planning. No matter how old you are, it’s inevitable that one day you will retire. If your employer has a 401K plan, consider signing up. If you received a raise this year, consider putting a percentage of your raise into your account, especially if your employer matches your contributions. If you are already contributing your maximum, you may want to think about getting a second fund.
  • Estate planning and will. No one likes to think of the worst case scenario, but being prepared for it helps those you leave behind. Whether you’re single or married with children, you want to be sure that your final wishes are met. You may want to include a living will and powers of attorney.
  • Life insurance. If your employer offers a life insurance policy, you should consider joining. If you reviewed your life insurance policy and found that you can increase your policy, you should do so. It’s worth a little more to ensure that your loved ones are financially fit when you pass.
  • Compare insurance. Ask your insurance company if they can offer a better deal on the same coverage. Inquire about discounts. Explore the competitors and see if they can offer a better deal. If you’re not bundling with the same insurance company, you may want to reconsider. Bundling your insurance can save your money.
  • Save, save, save. If you are planning on making a large purchase or planning a large event, try not to put the majority of the cost on a high interest credit card. Start saving ahead of time. Create savings accounts for each occasion and put in a little amount every payday. Eventually it will grow, and it will save you from paying more.

Money Matters was started in February 2011 and almost five years later, I still get great feedback on the column. Thank you so much for being loyal readers. I am honored that I can help readers achieve their financial goals. The goal of this column is to get you thinking of your financial well-being as much as you think about other things on a daily basis. I wish everyone a Happy New Year, and I hope that 2016 brings you many blessings.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at http://www.moneymattersguam.wordpress.com.

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