Make Some Mid-Year Financial Resolutions

1. Establish a budget.Many people bristle at the mere mention of the “B” word: budget. But budgeting is the first step in gaining control of your finances—and it usually isn’t as difficult or painful as most people think.

Start by determining your fixed expenses every month—things like your mortgage, utilities, car payments, groceries, insurance and the like. Then add in how much you spend in a typical month on discretionary items like entertainment and eating out. Now compare this to your total monthly gross (i.e., take-home) income. If your income doesn’t exceed your expenses and still leave some extra money for savings, start looking for ways to reduce your spending in order to bring your personal household budget into balance.

2. Control your debt.Excessive debt is one of the biggest obstacles to financial security and independence, as well as to saving for a financially secure retirement. So resolve now to get a handle on your debt as soon as possible. This involves two main steps:

· Don’t assume new debt that you can’t afford.Simply put, if you can’t afford to buy something right now in cash, don’t buy it. The generally accepted exception to this rule is a home mortgage.

· Pay down your existing debt.Start with your highest-interest debt first—which for many people is credit card debt—and then move onto other debt. Eventually, you may want to consider making extra payments toward your mortgage principal to potentially shave years off the time it takes to own your home outright and possibly save thousands of dollars in interest.

3. Build an emergency fund.Not having an emergency fund is one reason many people get into debt. Therefore, some financial advisors recommend saving anywhere from three to six months of living expenses or more and keeping the money in a liquid savings account (like a bank account or money market fund) that can be accessed easily to cover unexpected large expenses, like a new roof or air conditioner, car repair or medical bills.

4. Increase retirement plan contributions. If you are saving money regularly in a qualified retirement plan, congratulations! Your next challenge is to increase your contributions—ideally, until you’ve reached the annual contribution limit for your plan.

One way to do this is to increase your contribution amount when you receive a raise. Or, if you receive a bonus or commission check, contribute some (or all) of this to your retirement plan. When you “pay yourself first” in this way, you often don’t even miss the money.

5. Check your credit.You can get one free credit report per year from each of the three major credit reporting bureaus (Equifax, Experian and TransUnion) by visiting www.annualcreditreport.com. One strategy is to order a free credit report from a different bureau every four months, which will enable you to carefully monitor your credit all throughout the year.

Examine your credit reports carefully to search for any unauthorized credit requests in your name, as well as potential errors in your report. If you spot any errors, contact the credit bureau immediately to have them corrected—they could negatively impact not only your ability to borrow money, but also many other areas of your financial life.