With the economy in recovery, Americans are finally moving out of crisis mode and making financial decisions with an eye toward the future – rather than simply surviving.
Making smart financial decisions every day can be a challenge, though – and not everyone is thrilled with the choices they made in 2014. Less than a quarter of those surveyed by Merrill Edge said they’re proud of how they handled their money this year.
Here are a few big regrets Americans had this year – and how they plan to fix their financial behavior in 2015.
Dining Out Like Rockefeller
“We spend way too much money on food,” says St. Louis resident Michelle Schroeder-Gardner. “We probably spend about $900 a month on eating out and buying groceries each month, and we don’t even eat all the food we buy.”
Though she and her husband eat at low-cost restaurants like their favorite Mexican eatery, they can’t kick the habit of dining out twice a week, she says. “I want us to cut this down to $500 a month or less,” she says. “In the New Year it will be about meal planning, budgeting better for food, and eliminating waste.”
Falling for Flashy Credit Card Offers
Sarah Jackson (not her real name) regrets taking the bait. Despite her vow to get her credit cards under control, the 42-year-old New York City administrator couldn’t resist. “VIP offers 20 percent off, no interest for six month deals – the incentives made me forget I was trying to pay down bills, not add to them,” she said.
Jackson used the offers to spruce up her apartment. She’d nearly paid off a department store credit card when, short on cash, she charged $200 worth of winter clothes. Now that her six-month promotional period has expired she’s feeling suckered: She’s on the hook for interest on her balance.
She’s determined to learn from her mistakes. “I’m going into 2015 with more debt and at a higher rate. It’s time to think about getting a second job and cutting back.”
Setting It and Forgetting It
“My husband and I are really good about saving money,” says Felicitas Rodriguez (not her real name) of Pleasanton, California. “We both have mutual funds, deferred through our jobs and savings accounts.”
Yet the couple is guilty of ignoring the accounts. “We haven’t met with a financial advisor in two years,” says the 54-year-old social worker. “Forgetting about money is the easy way out.” Rodriguez says seeing their financial advisor is a must-do in 2015.
These three people aren’t the only ones who want to change their financial ways in 2015. Nearly a third of Americans are making financial resolutions this year, according to a recent report from Fidelity. For the fourth consecutive year, the top resolutions are saving more (55 percent), paying off debt (20 percent), and spending less (17 percent).
Here are a few tips for anyone else hoping to start 2015 on the right financial foot:
ONE: Set specific and quantifiable goals.
Instead of resolving to “save more,” decide to set aside a specific amount of money or a certain percentage of your paycheck each month. (Per Fidelity, the median commitment for 2015 resolutions is $200 a month.) The more precise you get, the more likely you are to follow through.
You should be putting away money for retirement and for emergencies, but creating an account for more near-term goals can keep you from tapping credit cards later.
If you want to spend $600 for the holidays next year, for example, put $50 per month into a separate savings account to hit the goal by December 2015, says Julie Murphy Casserly, president of JMC Wealth in Chicago.
TWO: Tackle your debt.
“Choose to not create more debt in 2015,” Casserly says. Then, make paying it a priority to pay off existing debt, starting with the highest interest debt like credit cards. Nearly one in five consumers polled by Allianz Life said credit card debt was holding them back.
See whether you can decrease your debt load by refinancing any additional debt. Interest rates are back at rock-bottom levels, so if you haven’t refinanced yet, now’s the time.
THREE: Watch your spending.
If you’re prone to overspend while shopping, try setting a budget and paying with cash, not credit cards. It’s usually far harder to hand over cash than it is to use a credit card.
FOUR: Develop a plan.
Take charge, whether it’s monitoring your finances, meeting with a financial planner, downsizing your home or getting rid of a vehicle. “This is the time to make tough choices, to be creative,” Casserly says.
Once you have a plan, write it down. Middle class Americans with a written financial retirement plan save more than twice as much as those without one, a Wells Fargo retirement survey found.
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