As New Year’s dawns, many Americans will embark on resolutions. Some have goals about living a healthier lifestyle or moving ahead professionally, while others plan to reach educational milestones or pull off a memory-making trip. But many adults also vow each year to improve their financial planning.

Some three in ten Americans vow each year to achieve better financial stability, according to Allianz Life Insurance’s annual survey on New Year’s Resolutions. Those who want to better manage money generally say they’re guilty of buying things they don’t need, saving but not enough, not saving at all, or spending more than they earn, Allianz reports.

If you’ve resolved to work on your financial planning, you’ll want to heed financial advisors’ advice on which financial shifts will make the best impact on your wallet and portfolio this year.

Know your budget

It sounds incredibly basic, but if you can’t live within your budget then you can’t budget for emergency savings, for financial goals, or retirement savings. Even adults who used to track their budget can veer off course over time when faced with too many surprise expenses, an income shift, overzealous holiday gifting, or a series of subtle price increases that add up over time—such as higher property taxes, insurance premiums, or a new toll on the work commute.

If it’s been awhile since you’ve tracked your budget, consider spending at least six months using a budgeting site or app, from Mint, Budget Simple, or MoneyStrands, just to name a few. When you know where your money is going, you can find where to rein in spending or reduce costs and unlock funds that could be saved.

Whack debt rationally

Carrying credit card debt is expensive, and according to recent research from Wallethub the average household has nearly $8,000 in credit card debt. If you’re carrying credit card debt, it’s important to find out your cards’ interest rates and work on reducing the highest-interest debt first, says John Flavin, CFO with Synergy Financial Management in Seattle.

“Even if it’s tempting to knock out a lower balance that has lower interest rates so you can feel good about completing that payoff, you always want to pay down high-interest debt first,” he notes.

If it’s going to take a long time to pay off a high balance, look into whether you can do a balance transfer to a cheaper credit card. Sites such as Bankrate may provide resources.

You can also investigate whether a family member might pay off the debt and let you repay the balance at a lower interest rate—and at least the interest goes to a person you care about rather than an anonymous institution.

Save and invest on a regular basis

Those working on improving their savings habit are advised to save gradually each paycheck or month, rather than wait till a magic time and move one single lump of money into investment accounts or savings.

“When it comes to investing, dollar cost averaging is your friend,” Flavin says. “This is especially true when there may be a time of volatility.”

Dollar cost averaging happens when investors buy a set amount of an asset (fund, ETF, stock) on a regular schedule. If that asset’s value ticks up and down with the market, buying it incrementally over time means investors spread pricing risk across time—not buying one time at a peak, but many times at different prices including the best prices.

With a presidential transition and markets showing gyrations, contributing regularly to accounts can help investors capture a smoother set of returns than if they waited for a single opportune time to put money into the market, Flavin notes. Rita Cheng, CFP of Blue Ocean Global Wealth in Rockville, Md., echoes his sentiments, noting that dollar cost averaging is particularly beneficial to younger savers. If they start saving and investing early, even a little bit, they will capture investment prices across multiple economic cycles. They’ll also have a savings habit built into their budget.

Save more

If you’re the sort of investor who needs to save more—meaning you’re not maximizing 401k contributions at work—you can turn up the heat gradually on your savings contributions so that the new savings amount or percentage allocation becomes a habitual part of your budgeting. That way, you don’t miss the money.

When giving to a 401k at work, for instance, you can adjust your contribution up slightly—perhaps by 1% or even 2%, Ms. Cheng notes. For an investor with a $50,000 salary who contributes 10% ($5000) to a 401k, adding an extra 1% ($500) to the 401k is relatively painless over a year’s worth of paychecks ($42 per month, or $21 per paycheck), as is adding an extra 2% ($1000)—and the uptick in investment could be employer-matched for maximum benefit.

Optimize your investments

If you’re on top of your budget, managing debt, and saving, you can turn toward optimizing your portfolio. Most advisors recommend rebalancing on a regular basis (either every six or 12 months) to make sure your investment mix hasn’t strayed too far outside your planned allocation. But some portfolios offer automatic rebalancing, which automates the rebalancing process. If it’s an option, Ms. Cheng says, enroll in it.

Investors who use low-fee mutual funds should note that when holdings in some funds surpass certain dollar amounts, they’re eligible to move the funds into a lower-fee edition of the exact same fund. At Vanguard, for instance, investors whose shares reach $10,000 in many mainstream funds can convert their money into the “Admiral” edition of the those funds—paying much lower expense ratios on the same set of holdings. Since expenses eat into savings over time, pay attention to balances and fund choices and discuss options with an advisor.

Pay extra toward your mortgage

If you’re a homeowner with a mortgage (and more than three fourths of homeowners have a mortgage), you can pay slightly extra each month or move to a two checks per month payment plan to reduce your loan’s principal faster.

Since mortgage interest rates tend to be low relative to other types of debt (and in recent years have been lower than stock and fund returns), most advisors urge investors to prioritize savings and retirement investing above aggressively paying down housing debt.

But if you’ve got an extra $50, $100, or $200 to apply to your mortgage each month, these extra payments can add up over time—and they can be especially useful for those nearing retirement, shoring up principal before a home sale, or for those who want to shorten a 30-year loan without refinancing to a 15-year loan.

“I want my clients to take advantage of building their wealth through IRAs, 529 college savings plans, and 401k contributions,” Ms. Cheng says. “But I also want them to have adequate cash reserves.”

Advisors want the same things clients do: Enough money to have smart choices when it comes to emergency and retirement savings resources.


Jane Hodges

Jane Hodges

Jane Hodges is the author of Rent Vs. Own (Chronicle Books) and has written about real estate and personal finance for The Wall Street Journal, New York Times, Seattle Times, Fortune and many other publications. Follow Jane on Twitter and Google+