I love setting financial goals for the new year. But over the years I’ve learned to pare back to just one or two that I can really focus on, rather than 10 smaller ones.

Take 60 seconds and think about what you’d like to change about your financial health in 2012. The most popular areas are debt reduction, frugal living and investing. All three of these elements contribute to your overall net worth; what you have left over when your total liabilities are subtracted from your total asset.

Where does your net worth stand? And no, your car isn’t considered an asset so scratch it off the list.

My recommendation for you this year is to set a net worth goal. So, if your net worth is currently $12,500, aim to increase it through debt reduction and asset growth to $20,000 by the end of 2012.

Hands down, the most effective ways to reduce debt are to make your payments automatically on the day you get paid, pay a little extra each month (even $10 makes a difference), and negotiate your interest rates so that you pay as little interest as possible.

The most effective ways to increase your assets are to save through an employer sponsored RRSP, pension or savings program.

If you’ve been sitting on the fence about home ownership, stop renting and build equity in your own home. But, this only makes sense if your cash flow can handle it.

There are three sure-fire ways to erode your net worth; accumulating bad debt, spending your savings, and buying things you don’t need.

Give some thought to setting a realistic net worth target you’d like to achieve in 2012. Then create a plan to make it happen.

Living a frugal life, minding your dollars and cents, will help you accomplish your goal and motivate you to improve your financial health. 

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