As 2012 comes to an end, we at Money Matters BVI trust that you have achieved financial fitness – or if you haven’t, that this will be one of your New Year resolutions. The good news is that each day, week, month or year offers the opportunity to begin again. For 2013, here are some tips to help you become financially successful.

1: Know What You Want

Have a clear, concise financial goal for the year. It isn’t good enough to say, “I want to have my credit card paid down and more money in the bank”. Instead, you should say, “I won’t owe any money on my credit card, and I’ll have over $5,000 in my savings account and a fully-funded individual retirement account.”

2: Prioritize Your Debts

Not all debt is created equal. Make a list of your liabilities and organize them by the annual interest rate you are paying. Those with the highest rates (most likely your credit card debt) should be paid off first, even if this means taking money out of savings accounts. It does no good to invest money while you are paying 19%+ each year. The wisest course of action may be to sell any certificate of deposits, savings bonds or other cash holdings and use them to pay the balance. Really?! Yes. Let’s say you owe $10,000 on your credit card and pay 19% interest annually ($1,900 per year). You also own a $10,000 certificate of deposit at a bank, paying you 1% interest ($100 a year). If you sell the certificate and use the $10,000 to pay off your credit card debt instead, you will save yourself $1,800 a year!

3: Open an IRA

If you haven't done so already, open an individual retirement account (or IRA for short). Your financial planner or accountant should be able to tell you whether a “traditional” or “Roth” IRA is better for you. Both offer important tax advantages that can add up to a significant amount by retirement.

4: Enroll in an Automatic Savings Plan

Automatic savings plans (ASPs) are now offered for everything from brokerage accounts to government bonds. Simply call your broker and tell them you want a certain amount of money withdrawn from your checking or savings account each month on a certain day and deposited into your investment account. This forces you to save because the cash is drawn directly from your bank before you can get your hands on it.

5: Close Unnecessary Accounts

Banks and financial institutions charge fees for everything under the sun. Is it really necessary to have several credit or checking accounts? Although there are exceptions, in the vast majority of cases the answer is a firm No! To put things into perspective, just imagine your bank charges you $8 each month for your checking account. In thirty years, that $8 will have added up to more than $8,500 after taxes!

6: Make Money Doing What You Love

Most people can name at least one thing they are truly passionate about. One of the ways to enjoy your work is to do only the things you enjoy. Find a way to turn your passions and hobbies into profit. The world is full of amazing jobs such as full-time ice cream tasters and video game testers!

7: Collect Your Change

Any time you make purchases with cash, only spend whole dollar amounts. If you go to the grocery store and your ticket comes to $67.39, pay $70 in cash and pocket the change. The first thing you should do when you go home is throw the money in a large container (empty water jugs are perfect.) If you adhere to this policy and don’t spend any of the change, you are likely to save several thousand dollars over the course of a year. Use the money to pay down debt, open a certificate of deposit, or go on vacation. You may do the same with any loose change in your pockets at the end of the day.

8: Give Money

One of the most effective ways for you to realize what value money have is to give it away. The next time you get your paycheck, take 5% of your salary in cash – the greenbacks in your pocket will make it seem far more real than if you simply wrote a check or used a debit card. Walk into a coffee shop and anonymously pay for the other customers in line. If you pass a child in a store staring at a new video game, ask the parent discretely if this is something they would like the child to have and if agreed upon, arrange to buy it for them. In both cases, the recipients are sure to remember your kindness for years to come. It is a powerful and effective way to change other people’s lives for the better while giving you a better sense of freedom financially. Suddenly, you realize just how much promise $20 contains.

9: Begin Using Personal Finance Software

Knowledge is power. If you asked ten people on the street how much they spent last year on books or movie tickets, nine of them probably couldn’t answer. With a few keystrokes, however, someone using personal finance software can find out. The end of December is a good time to print out a report and spend an evening going over your income and expenditure for the year. You may be surprised at how much you spend on small items such as ATM bank fees and chocolates.

10: Read Finance Books

Just as cookbooks can be a great way of learning how to prepare delicious food. Personal finance books can help you make the most of your money. Consistently applying yourself to learn as much as you can about the financial markets, the nature of money and investments in general is absolutely essential to creating long-term wealth.
The journey to a successful 2013 begins with one step!

Best Wishes and a Happy New Year from Money Matters BVI!