SALT LAKE CITY — Pastor Andrew Clark of Salt Lake City's Ebenezer Church of God in Christ describes 2002 as one of his darkest years, when life events hit his bank account hard. His wife left him and, when they eventually got back together, they knew they had to change their dire financial situation.
Clark enrolled in a financial education course, where he was struck by an illustration of a man tied up in chains. "I don't want to be in bondage in spiritual matters or financial matters ever again," he said.
Pastor Clark's determination to free himself from the stranglehold of debt and take charge of his financial future is one resolve all of us, regardless of our financial circumstances, would do well to adopt or reaffirm in 2013. The New Year is the ideal time to take stock of your finances and make goals for the year ahead.
Start out with a few specific and realistic objectives, then write down those goals and revisit them often. Whether your personal finances need a major overhaul or a minor tweak, consider implementing the following financial principles this year:
Track your spending. You can't execute a plan for saving until you have a clear picture of how much you are spending. Taking time each week to record expenses will give you a bird's-eye view of your finances so you can find ways to reduce spending and make sure you're on track with your goals.
A variety of personal finance software exists to help you create and update a personalized budget easily and efficiently. Or you can try a free online tool like Zions Bank's eZ Budget to track expenses and access your budget from any location.
Pay down debt. Credit card debt per borrower is expected to rise to $5,446 by the end of 2013, its highest level since 2009, according to reporting agency TransUnion. And young adults are especially vulnerable when it comes to credit card debt. A new study out this month by Ohio State University professors Lucia Dunn and Sarah Jiang found that adults born between 1980 and 1984 have credit card debt that is substantially higher than their parents and grandparents, and they are paying off their debt much more slowly.
Chipping away at your monthly credit card, car and student loan debt by adding a modest amount to your monthly minimum can add up to thousands of dollars in interest savings. And as you pay down excess debt, your credit score will go up, saving you money in the form of lower interest rates on future loans.
While simple math suggests you should prioritize paying off higher-interest loans, many people have more success paying off the smallest debt first, which gives them the momentum to tackle the next smallest debt.
Build up an emergency fund. Having spare cash at your disposal not only makes an emergency situation far less stressful, it also helps you steer clear of costly sources of quick cash like high-APR credit cards, short-term loans and payday loans.
Most experts recommend setting aside three-to-six months' worth of living expenses for emergencies. Start with a more attainable goal of $1,000 of emergency money. Most people can save this much in as little as a month. To increase your chances of success, consider having a portion of your paycheck automatically deposited into your savings account.
Boost your money IQ. David Loveless of Provo vividly remembers the day he found himself at the store with his young daughter and $3 to his name. He used the money to buy milk and a cheap loaf of bread, but he could not afford to buy the 50-cent balloon his daughter asked for.
"I broke inside that day," Loveless said. He enrolled in Financial Peace University, a nine-week financial education course, which he credits with saving his finances and his family.
"Four years later, we have freedom and power. Peace," he said. "Not long after Financial Peace University, I marched back to that store and bought my daughter a balloon. In fact, I bought two."
Sometimes a little education can go a long way in helping you make informed decisions about your finances. In the 10 years Zions Bank has collaborated with Dave Ramsey's Financial Peace University, it has been nothing less than amazing to watch families free themselves of debt and improve their financial futures. Participants pay off an average of $5,300 in household debt and add $2,700 to savings within the first three months of the program. Take advantage free community resources or consider a financial education course to help you increase your financial literacy.
Plan for the future. With Americans living longer and saving less, many people nowadays are in danger of outliving their retirement savings. See that you're socking away enough each month to meet the growing cost of retirement. If you're not already contributing the maximum amount to company 401(k) plans and other retirement vehicles, adjust your withholding. And if it's financially feasible, ensure your children's future by set aside funds for college with a 529 plan that offers tax advantages.
Johnny Cash defined success as "having to worry about every thing in the world, except money." While some financial stresses are unavoidable, setting your sights on measurable goals will allow you to enjoy the rewards and peace of mind that come with taking control of your money.