1. Create (and maintain) a budget
"Establishing a household budget is a cornerstone of economic success," says June Walbert, certified financial planner with USAA Financial Planning Services. In fact, 88% of people with a savings strategy manage to stash away money, in contrast to 50% of folks without one. Start off by tracking your spending for one month. Write down fixed costs such as mortgage and car payments. For discretionary items, keep tabs on small purchases (like the kids' movie tickets) with a debit card, and save receipts for cash-bought items. Once you understand your expenses, you can redirect nonessential costs toward your savings goals.
Fast Fix: Monitor spending with free, user-friendly websites and mobile apps from Mint.com and Pageonce.com.
Watch Out: Families forget to save for home and car maintenance. Although these aren't everyday costs, they should always be incorporated into an annual budget so that you're not short on cash when they occur, says Eleanor Blayney, consumer advocate for the Certified Financial Planner Board of Standards.
2. Automate your bills
When life gets hectic, it's easy to accidentally skip a credit card payment. But a creditor doesn't care about your kids' busy schedules or that you're swamped at work. In addition to a hefty penalty, a late payment can negatively impact your credit report—your payment history makes up 35% of your credit score. Improve it by automating as many bills as possible.
Fast Fix: Use the auto-pay feature on your bank's website to manage bills that are the same each month. For amounts that vary (like utilities), set them up to be debited from your checking account.
Watch Out: If you often have a low balance, it's better to pay bills yourself, as doing it automatically may cause you to overdraw. Sign up for e-mail or text due date reminders on Mint or Pageonce.
3. Decrease credit card debt
Take a hard look at how much you owe and come up with a realistic plan to reduce it. The first step is to identify and trim discretionary expenses, and then put that extra cash toward your credit card balances. You can also call lenders and request a lower interest rate. Remember, lowering your debt is one of the best ways to improve that credit score.
Fast Fix: Use cash or your debit card for everyday purchases. Keep only one credit card in your wallet for emergencies.
Watch Out: People often mistakenly pay the card with the highest balance first, says Stuart Ritter, a certified financial planner with T. Rowe Price Investment Services. But it's actually better to choose the one with the steepest interest rate.
4. Start an emergency fund
A rainy-day account provides security in case of unexpected financial hardship, such as job loss or large medical bills. It should allow you to continue to meet obligations without going into debt. Try to set aside enough to cover three to six months of expenses, says USAA's Walbert.
Fast Fix: Open a separate bank account for emergencies so you aren't tempted to dip into it for want-but-not-need purchases like a flat-screen TV.
Watch Out: Even if you can't set aside three to six months' worth of expenses, don't give up on the idea; try to contribute whatever you can on a recurring basis.
I have $100 extra a month—how should I allocate it?
Every situation is different, but as a general rule you should cover these three needs:
$35 to an emergency fund
$35 to debt reduction
$30 to a retirement account
Share your 2012 money resolutions at familycircle.com/resolutions.
Originally published in the January 2012 issue of Family Circle magazine.