Resolution without a plan won't work

The Savage Truth

Don't make a financial resolution — make a plan. Resolutions made at the dawn of a new year tend to have lofty goals: losing weight, stopping smoking, getting out of debt. And while these goals are certainly worthy, it's an old Savage Truth that a goal without a plan is just a dream.

The latest Fidelity Investments' Annual Financial Resolutions Study finds that as the economy moves into better shape, people are more likely to make more financial resolutions. When the survey was started in the midst of the financial crisis, the resolution focus was on getting out of debt.

Now, with the economy growing and unemployment down, Fidelity notes that those planning to save more for retirement is at an all-time high of 64 percent, compared to 53 percent just last year.

But how do you turn these great intentions into an actionable plan? Here are five tips for improving your financial future, relatively painlessly:

Raise your retirement plan contribution: Now is the perfect time to increase the deduction for your company plan or increase the automatic monthly withdrawal from your checking account that goes into your IRA. If you haven’t opened an IRA, contact Fidelity or T. Rowe Price and start with as little as $1,000, if you make an automatic additional monthly contribution.

Know where you stand in your retirement funding: Almost every major mutual fund company offers an online retirement calculator. Fidelity's Retirement Score Calculator asks six simple questions about your age, current savings, annual income, income replacement goal in retirement and risk tolerance. Then with a click you can see where you stand and how much more you need to contribute each year to have a good chance of maintaining your lifestyle in retirement.

Pay down your debt: Nothing will destroy your future faster than debt. It's a bigger risk to your financial health than the stock market, by far. It may seem silly to invest in the Standard & Poor 500 index mutual fund to earn only a dividend yield of about 2.5 percent, while hoping for market gains. But paying 18 percent or more in interest on your credit card balance is a sure road to financial disaster.

There’s a simple formula to pay down credit card balances. Simply double the current minimum monthly payment and pay that same exact amount every month (even as future minimum requirements decline). Don't charge another penny. Your balance will be paid off in less than three years, compared with up to 30 years if you only pay the required minimum every month.

Spend less: Saving more or getting out of debt is a lot easier if you just decide to spend less, of course. It can be a combination of small things — avoid dining out, taking taxis or going to the movies. You also forego one big item a month in your goal to create a better future. Is it unthinkable to cancel your cable service or meal kit delivery? Think what a dent it could make in your spending.

Earn more: This is the easiest way to be able to pay down debt and save more money. This doesn't mean asking the boss for a raise. Uber and Lyft have proved that millions of Americans want or need flexible work to add to their income. Now look around at all the things you could do to help others — driving seniors, babysitting children, working in a retail store. All of them can add temporary income to reach your goal. There are apps and websites, such as Snagajob, that can help you locate jobs in the gig economy.

Taking action is the difference between making a resolution and making a plan. What action will you take right now to make your financial dreams come true? That's the only way it will happen. And that's The Savage Truth.

Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” She responds to questions on her blog at

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