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How to keep your New Year's financial resolutions

(MoneyWatch) When you think about it, New Year's financial resolutions may be easier to keep than losing weight or quitting that smoking habit. According to a study by Fidelity Investments, 62 percent of consumers say they stuck with their financial resolutions in the past year, compared with only 40 percent who kept their other resolutions.

Despite this evidence of success, 38 percent of respondents to the Fidelity New Year Financial Resolutions Study thought it's harder to keep financial resolutions than non-financial ones. But that has not kept them from trying. A record number of consumers (46 percent) are considering making financial resolutions, a number that has increased 31 percent since the tracking study started in 2009. The top three New Year financial resolutions are to: (1) save more (52 percent); (2) spend less (19 percent); and (3) pay off debt (19 percent).

But wait -- another survey found that most Americans are skipping financial resolutions all together. According to the annual New Year's Resolution Survey from Allianz Life Insurance Company of North America, a staggering 84 percent of Americans surveyed said that they will not include financial planning in their resolutions for 2013.

So which survey is right? From over here in the real world, the answer is, "who cares?"

Whether you call it a resolution or a plan, here's what I have learned after being in the business for over two decades: It's easier to reach a financial goal when you articulate it and create a plan of action to achieve it.

You need not go overboard with this process. While many financial planners will create comprehensive plans that aim to tackle every area of your life, you should concentrate on the three most important components for your 2013 resolutions. Once you have tackled them, move on to the next three, and so on.

If you don't know where to start on your resolutions/goals, check to see whether you have these three core components covered: zero consumer debt (credit card, auto loans); adequate emergency reserve funds; and maximization of retirement plan contributions.

Debt burdens have dropped dramatically over the past five years. U.S. households spent 10.6 percent of their after-tax income on debt payments in the third quarter of this year, the lowest level since 1983, according to the Federal Reserve. That's good news, since it's nearly impossible to tackle other financial goals until consumer debt is paid down.

It's still amazing how few Americans have adequate savings cushions to guard against unforeseen events. The general recommendation is to hold 6 to 12 months of living expenses in cash or cash equivalent accounts. Considering that the average duration of unemployment is still running about 40 weeks, this level of savings should allow you to ride out many a financial storm without raiding your retirement assets. For those in retirement, consider carrying 12 to 24 months of expenses.

Many people are contributing to retirement plans up to the level at which their employer matches, which is often 6 percent. But that amount is not going to be sufficient long term. To hit your goals, chances are you will probably need to put away 15 percent of your salary or, in some cases, even more. The federal government is helping by increasing the 2013 limit for employees who participate in 401(k), 403(b), most 457 plans and the government's Thrift Savings Plan to $17,500 from $17,000. The catch-up contribution limit for employees aged 50 and over remains unchanged at $5,500. The limit on annual contributions to traditional and Roth IRAs will rise by $500 to $5,500.

If you have these three goals covered, the next three should include areas that are usually given short-shrift in the hierarchy of planning: tracking your expenses; drafting/updating wills and other estate documents; and reviewing insurance coverage (life, disability, long-term care and property and casualty). These are not sexy topics, like investing can be, but without them, your financial security could be at risk.

Consider these goals as ways to improve your financial health and make 2013 a happier one!

Distributed by Tribune Media Services Inc.

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