5 Very Simple Money-related New Year's Resolutions You Can Start Doing Now

5 Very Simple Money-related New Year's Resolutions You Can Start Doing Now

Money-matters can be a very polarising subject--some people talk about it non-stop, while others don't seem to care less. But we all know deep down that money is a necessity, and it does make the world go around.

So if we all agree that money is really important in our lives, shouldn't we make some effort in understanding how we can use it to our advantage? This stuff can make or break anyone, honestly.

Perhaps starting this new year, you can make a promise to become a more effective money manager. How? Here are 5 very simple new year's resolutions you can begin doing right now from CNBC's Make It!

Start investing in your 20s if you can

The earlier you begin saving and investing, the better off you'll be."The truth of the matter is, you should be investing more in your 20s than you do in your 30s if you can," personal finance expert Suze Orman tells CNBC Make It! That's because the younger you are, the more time your money has to compound.

Compounding means that, in addition to earning money on your contributions, you also earn on returns on those returns over time. Because of this, your money grows exponentially. So if you invest a small amount and let it grow for decades, it will generally amount to much more than if you had invested a larger amount later.


Don't focus too much on saving

If you're just saving and not investing, you're setting yourself up to lose money in the long run, says Danielle Town, author of "Invested: How Warren Buffett and Charlie Munger Taught Me to Master My Mind, My Emotions, and My Money (with a Little Help from My Dad)." That's because inflation causes prices to rise, which makes money less powerful over time. While a $20 bill will always be worth $20, what you're able to buy for that amount dwindles.

If you had stuffed $1,000 in cash under your mattress 50 years ago, today it would have the same buying power as only $137.45 did in 1968. However, that same amount invested with compound interest would have grown to about $20,000, assuming a 6 percent rate of return. Even if you only earn a 4 percent rate of return, it still grows to around $7,000.

Although experts advise having three to six months' worth of living expenses stashed away in a liquid savings account, it's smart to put any extra cash to work . "The antidote to losing money on inflation is investing," Town says. "You've got to do something with your money."


When the market tanks, stay calm

The stock market has had a volatile year. But for the average person, shifts in the market , even dramatic ones, shouldn't be cause for panic. In fact, legendary investor Warren Buffett says that the best thing you can do when the market tanks is to ignore it.

Billionaire Ray Dalio agrees. Though it might be tempting to sell when the market drops, he says, you shouldn't base your investing decisions on fear or emotion.

"You can not possibly succeed that way," Dalio said at the Harvard Kennedy School's Institute of Politics . "You've got to do the opposite. It's when you're not scared you probably want to sell, and when you are scared, you probably want to buy."


Maintain a good credit score

If you want to get the best rates on mortgages, car payments and other types of loans, you need a solid credit score.

Earning an "excellent" score makes a difference. You could score a lower interest rate on your mortgage or qualify for the best credit cards. How can you achieve this? Simple: just make sure you pay your bills and debt on-time and in full.


Understand how debt holds you back

Debt doesn't just cost you money. The side effects of being in the red can affect other important parts of your life, keeping you from earning more and getting what you want professionally, says Suze Orman.

"When you are in debt, you feel it," she says, and "your boss can feel that," too. In essence, "you render yourself powerless." Carrying debt can make you feel out of control and dependent on other people: "You walk into an interview and you need that job because you have to pay for your debt."

That's why Orman advocates making debt repayment a top financial priority. Once you're out of debt, you exude confidence, she says: "You attract people to you. And guess what? Then you attract money. So get yourself out of debt and stay out of debt, the sooner the better, if you ask me."



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