Whatever your financial situation, a new year presents an opportunity to improve it. Whether you're skating on the edge or your finances are in tip-top shape, take some time to think about where you are headed.
Often, the first step is to see your situation for what it is. Americans are taking more control of their finances, experts say, and more are making money-related resolutions this year than in any of the past five years.
In fact, 54 percent of Americans said they "typically consider resolutions concerning their finances" up from 2009 when just 35 percent said they would make financial resolutions,according to the Fidelity 2014 New Year Financial Resolutions Study. Consumers also have become more conservative in their spending and savings habits.
"We're seeing a lot more conservative consumers these days than 20 years ago," says David Jones, president of the Association of Independent Consumer Credit Counseling Agencies. "People have been sobered by this economic situation and have changed their lives. Savings rates are higher than in the last 50 years."
Americans are shifting toward short-term savings goals more than ever, according to the Fidelity study that surveyed 2,027 U.S. adults ages 18 and older in November. Though long-term savings goals continue to dominate short-term ones - 53 percent compared to 39 percent - the gap between the two shrank this year among those who listed "save more money" as one of their top three financial resolutions for 2014. The study also found that 44 percent of Americans make resolutions as individuals while almost a third (29 percent) contemplate resolutions that involve their spouse or significant other. Almost half believe the economic uncertainty of the past year - such as the debt ceiling battles and potential changes in interest rates - might hurt their chances of keeping their financial resolutions in 2014.
The credit, debt and spending habits of Americans have changed, according to credit experts, who say Americans are spending more but using credit cards more carefully. "Americans are paying down debt," says David Robertson, publisher of The Nilson Report, a publication that covers payment systems worldwide. For the past three years, outstanding balances on credit cards have been flat. "Spending is actually rebounding, but people are paying off their credit card bill in full," Robertson says. "There is no growth in debt unpaid on credit cards." Consumers are "confident enough" to use credit cards but "savvy enough" to pay their bill in full every month, he adds. In fact, 63 percent all credit card bills were paid in full every month during 2013 compared to approximately 55 percent in 2007, Robertson says. However, 37 percent are still carrying credit card balances.
When it comes to New Year's resolutions that will save you money in 2014, you goals should depend on your current financial situation. The first step is to review everything, Jones says. Figure out your monthly income, expenses and expendable income. "Most people have trouble putting a budget together and leave things out," Jones says. "They think they have disposable income when they really don't."
For those who carry credit card balances, Jones advises finding a way to pay off one credit card in full during 2014 - and not necessarily the one with the highest interest rate but the one with the lowest balance. "Pay more than the minimum each month without creating a situation in which you will charge up other cards in the process," Jones says. "Use your disposable income to pay off that one card."
Here are other tips for making New Year's resolutions that will save you money in 2014:
Take an inventory of your expenses. This means looking at every expense you have - including cable, cellphones, coffee or other specialty drink purchases - and determining how you want to spend your money, Jones says. Bring your lunch to work as a way to save $7 or more per day, depending on how much you typically spend.
Fund your 401(k) plan. Even before creating a liquid savings account, start a habit of funding your 401(k) plan, especially one that provides matching from your employer. Jones suggests maxing out your contributions to your 401(k).
Build an emergency fund. In a world where many people live from paycheck to paycheck, accumulate six months of take-home pay in case you lose your job or have a medical emergency. Jones suggests keeping that money in a savings account where you can easily access it, even if it receives almost no interest.
Live beneath your means. "This is a good resolution for anybody," Jones says, adding that many people live beyond their means for 30 years. People who have been making $300,000 or more since 2008 can have a more severe fall if something catastrophic happens in their lives such as loss of income or serious illness. Jones says those in that income category makes up more than 1 to 2 percent of the U.S. population. For example, even if you can afford a Cadillac, buy a lower-priced car.
Consolidate credit card debt. Anyone who has trouble paying their credit card can seek credit counseling to change the way they are earning and spending. "Just about anybody is eligible for a debt repayment plan who doesn't have money to pay their credit card bills with the interest rates as they are," Jones says. With debt consolidation, they can lower their interest rates.
Pay back credit you obtain at 0 percent interest before the last day of the offer. Credit card companies count on a certain percentage of borrowers not paying the credit card balance before the interest rate jumps from 0 percent to 15 percent or more, Robertson says.
Everyone has a different financial situation, but you can resolve to improve yours in 2014. The first step is to face your finances by creating a detailed budget of every source of income and expense you have. Once you know where you stand, you can begin a step-by-step process of improving your fiscal life.