12/26/2012 03:05 pm ET Updated Feb 25, 2013

Resolve to Be Financially Secure in 2013


When it comes to making New Year's resolutions, getting into good shape financially ranks right up there with losing weight and eating healthier. All three goals require discipline and planning; and, as you've no doubt experienced, it's not unusual to encounter setbacks along the way.

Don't let losing a minor battle here or there convince you to surrender on the bigger war. You'll probably have more success if you start out taking small steps, learning from your mistakes and gaining momentum as you go.

Here are a few suggestions for better managing your personal finances in the New Year:

Create a budget. The first step on the road to financial health is to create a budget you can live with. If you're new to budgeting or haven't been successful in the past, start slowly. For a few months write down every cent you spend: mortgage/rent, utilities, food, gas, medical co-payments, credit card interest -- the works. You'll be surprised where you money goes.

At the same time, compare money coming in (income) to money going out (expenses). If you're just breaking even or losing money each month, you need to boost your income and/or aggressively trim spending. Along with the usual suggestions like brown-bagging more lunches and buying fewer to-go coffees, try these strategies:
  • Pay bills on time and send at least the minimum amount due. You'll avoid late fees and related interest rate increases; plus, you'll improve your credit score.
  • Balance your checking account regularly and use in-network ATMs to avoid overdrafts and ATM fees.
  • If your employer offers flexible spending accounts, use them to pay health and dependent care expenses with pretax dollars.
  • Raise insurance deductibles and shop around for better rates.
  • Reduce energy bills by turning down the thermostat, weatherproofing your home, turning off inactive "energy vampire" appliances and buying energy-efficient appliances.

You can find free budgeting tools at, the National Foundation for Credit Counseling, and Practical Money Skills for Life, a free, personal financial management site run by my employer, Visa Inc.

Pay off debt. Once you start reducing expenses, use the savings to pay down debts more quickly. One effective method is to make a table of all outstanding credit card and loan balances and their corresponding interest rates. Then, each month pay the minimum amount due on each account -- except pay as much as possible on the account with the highest interest rate. Once that one's paid off, move to the next-highest rate account and so on. You'll save money on overall interest expenses, plus the sense of accomplishment may inspire you to kick it up a notch.

Emergency fund. Another smart move is to have an emergency fund you can draw on in case of financial upheaval (layoff, medical emergency, unexpected car repairs, etc.) Ideally you should save enough to cover six months' of expenses, but don't be discouraged if that sounds insurmountable: Start slowly by saving a few dollars each week. You won't miss it and your little nest egg might just save you from needing an expensive short-term loan to cover an unplanned bill.

Safeguard your credit. Your credit rating determines everything from qualifying for a mortgage, to car loan and credit card interest rates, to whether you'll be able to rent an apartment or get a job. To know where you stand, order one free credit report per year from each of the three major credit bureaus: Equifax, Experian and TransUnion. Order them through government-sponsored; otherwise you'll pay a small fee.

Check your credit reports for errors or fraudulent activity and report any problems to the bureaus immediately. For tips on ways to improve your credit score, visit Visa's What's My Score.

Prepare for family catastrophes. If something terrible happened to you, would your family be protected financially? Make sure you have a valid will, durable power of attorney, health care proxy and living will. Numerous books, online articles and sample forms are available if you want to draft them yourself, but you should probably review your documents with a financial advisor or attorney to avoid potential legal problems. Also, make sure you have adequate life and disability insurance.

Save for retirement. It's debatable how much Social Security will be able to contribute toward your retirement income in coming decades, so if you're not already participating in your employer's 401(k) plan or an IRA, make that one of your top financial resolutions.

In the meantime, you can open an online Social Security account that shows a complete record of your taxable earnings and estimated retirement, disability and survivor benefits based on those earnings. It's important to fix any errors or underreported income during your work years, since your eventual benefit will be based on this record.

Sticking to resolutions is never easy -- if it were, we'd already be doing them. But striving to improve your financial situation now will pay off big-time down the road.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.