You know your finances are a mess. But why wait until New Year's Day to make changes? Here are four financial resolutions you should make, and start following, before 2016 rolls around.
1. Make a Realistic Budget
Before you can change your financial habits, you need a roadmap listing how much you earn each month and how much you typically spend. Once you have a handle on your monthly expenses and income, you can better determine how much extra money you have to save each month or pay down credit card debt.
Creating a budget needn't be a chore. Simply list the income that comes into your household every month, then list the expenses that you must pay every month. Some won't vary, such as your mortgage or car payment. Some might change, such as groceries, gas, utility bills, or your minimum monthly required payments on your credit card. Calculate an average for these fluctuating bills.
Don't forget to budget for discretionary items, too. You'll need to list how much you plan on these "extras" — such as entertainment, travel, or shopping.
Once you have all your monthly estimated expenses and income tabulated for the month, you'll have a better idea if you have any extra money to build an emergency fund, cut down your credit card debt, or pay toward your mortgage's principal balance. Still overwhelmed? Try free tools such as Mint or You Need a Budget to help create and track your budget.
2. Put Aside $100 a Month for Your Emergency Fund
Far too many people have no emergency fund to handle life's unexpected expenses. If your furnace conks out or your car's transmission goes on the fritz, how would you pay for the repairs? If you're like many, you'd put them on your credit card.
An emergency fund, though, can act as a safety net, allowing you to pay for costly repairs with cash instead of credit. An emergency fund can help you through periods of unemployment too, giving you spending money as you search for a job.
Ideally, your emergency fund should have enough dollars to cover six to 12 months of living expenses. That can be an imposing figure. But saving $100 a month for an emergency fund? That's not nearly as intimidating — and the money adds up quicker than you might think.
3. Always Pay More Than the Minimum Monthly Payment
Credit card providers are required to list how long it will take you to pay off your debt if you only make the minimum required payment each month. Resolve to look carefully at this information on your next credit card statement. The numbers there might shock you.
Here's an example: If you have $5,000 in credit card debt at an interest rate of 17%, and your minimum monthly payment is 3% of your balance, it would take you 189 months — nearly 16 years — and a total of $9,207.81 to pay off that balance. And that's only if you don't use your card to make any additional purchases.
Resolve starting this month to always pay more than the minimum. You'll save thousands of dollars in interest.
4. Give Your Credit Card Issuers a Call
Make a call before New Year's Day to the financial institutions behind your credit cards. Why talk to them? To ask them for lower interest rates, of course.
You might be surprised at how willing credit card companies sometimes are to reward good customers with lower interest rates. If you carry a balance each month on your cards — you shouldn't, but many of us do — these lower rates can save you a big chunk of change.
Your odds of convincing your card provider to give you a lower rate will be higher if you've been a long-time customer and if you have a history of paying your credit card bill on time each month. But you'll never know if you can nab a lower rate if you don't first call.
This article first appeared at Wise Bread.