As you contemplate the financial hangover from the holiday season, this is a great time to align your everyday personal decisions with your long-term financial goals. Harold Pollack, who teaches social service administration at the University of Chicago, walks through some suggestions that may help in the coming year.
  1. Pay off (or chip away at) your credit card debt
    Over the past 50 years, the average return on stocks was about 9.8 percent. The Federal Reserve reports that the average annual rate imposed on Americans who are paying credit card interest is 13.93 percent. That’s the rate of return you get — tax- and risk-free — on every dollar you devote to paying down your credit card debt. Doing so will get you to your financial goals faster — dollar for dollar — than almost anything else you can do with your money.
  2. Buy an hour’s time with a financial adviser or accountant
    When it comes to retirement savings, a financial adviser can be either part of the problem or part of the solution. Much depends on which advisers you listen to, and for what purposes. A lot of advisers provide biased, self-serving advice. A good financial professional, facing the proper incentives, can offer genuinely valuable advice. A good accountant can play a similar role. The key to finding an adviser who will actually work for you is simple: Pay the adviser out of your own pocket.
  3. Pay cash up front
    One smart way to save money is to lay off your credit or debit card and to simply pay cash. Experiments confirm commonsense reality: Many of us spend more when we can deploy a brightly colored piece of plastic rather than actual cash dollars. Ignore that nice credit card rewards program, too. It’s better to pay cash, spend less, and give yourself your own reward program. If you need to borrow, get money from a bank. Otherwise, pay cash.
  4. Keep a financial diary
    It’s hard to make a sensible financial plan when you don’t know what you’re spending. So keep a financial diary for a few months, in which you record everything that you spend. You can do that in a notebook or a spreadsheet. Many apps and websites can help with this, too. You might be surprised at what you learn. Make sure that you include everything on your credit card bill, too — like that old identity protection service or electronic subscription you forgot you even had.
  5. Look for savings on your cellphone and cable bills
    Your cellphone bill is a target-rich environment for saving money. Do you need so many minutes on your calling plan? (Probably not.) Are you willing to sacrifice some real or perceived network quality for cheaper service? And if you haven’t shopped around for cellphone service in the past two years, you are probably overpaying.
  6. Build up three months' worth of expenses in a strategic reserve
    Ideally this reserve should cover a few months’ living expenses in case you get sick or lose your job. Accumulating this reserve is definitely hard. You won’t do it overnight, either. But you’ll be ready for a real emergency such as your car getting totaled, a burst water main, or losing your job. A strategic reserve brings enormous peace of mind, too. You don’t have to frantically check your bank balance or waste time juggling expenses to navigate short-term financial challenges.
  7. When you’re ready, start an investment account dedicated to your children’s college
    If you have young children, this might be a good year to open a dedicated college account, to which you make modest contributions straight from your paycheck.
  8. Check the fees on your investments
    Mutual funds list an "expense ratio," which tells you how much you’ll lose each year due to overhead. Barring unusual circumstances, you shouldn’t invest in funds with an expense ratio higher than 0.3 percent — and you might be able to do even better. Don’t be fooled by mutual funds that charge higher fees and claim they’ll be able to deliver above-average returns. Instead, look for index funds, funds whose goal is to provide customers with a broad portfolio of assets at the lowest cost.
  9. Seek cheap thrills
    Taking a friend to a high school basketball game, finding that inexpensive Middle Eastern restaurant, or hitting the state park or a public beach are all pretty fun. They don’t cost much, either. Not coincidentally, cheap thrills are often shared experiences with people we like or love. A long line of psychology research initiated by Thomas Gilovich documents that memorable experiences give us more lasting happiness than do enjoyable new things.
  10. Quit smoking (and cut down your restaurant drinking, too)
    The national average price of cigarettes is about $6.25 per pack. A pack of cigarettes costs more than $10 in many localities. So pack-a-day smokers are spending thousands of dollars on cigarettes every year. You can save a lot of money by quitting or cutting down. Watch your drinking, too, particularly when you are dining out. Alcohol is the most notoriously high markup on restaurant menus.
  11. Raise the deductibles on your auto and homeowners insurance
    Your auto and homeowners insurance may be ripe for savings. Insurance policies come with a deductible — the amount you have to pay out of pocket before the insurance company will start picking up the tab. The higher your deductible, the lower your insurance premium will be. Get the largest deductible you can handle on your auto and homeowners insurance. Of course, this runs the risk that you’ll have larger out-of-pocket costs. But you’ve got your strategic reserve for costly repairs.