Hoping to enhance your financial life this year? Want to put your money to work? Here are my top tips:

Identify Your Goals and Establish a 5-Year Plan

Our money is meaningless unless we attach it to specific and tangible goals.  Take time to think about your future five years down the road. I find that we often dwell on saving for today and 35 years from now when we retire, but all those years in between is when life happens. Best to be prepared for life’s milestones, right? Whether you plan to buy a home, go back to school or start a family, visualize those goals and commit to saving now. Any money that you absolutely need in the next five years to afford a major life event make sure to keep out of the stock market. Instead, place your 5-year goal money in a safe savings account or CD.

Save on Autopilot

Can’t find the willpower to save? Then take all the effort out of it by automatically saving a portion of each paycheck in a savings account. Just set up a schedule with your bank online. Each time your paycheck gets deposited into your checking account, set it up so that your bank transfers a percentage – 10 or 15% – soon after into a separate savings account.  Do this until you have about 9 or 10 months of your living expenses saved up in case of an emergency.

Use Cash

Cash can go a lot farther than credit if your hope is to save. That’s because both physically and psychologically, cash prevents us from spending more than we have. Credit card limits can exceed $20,000, which often leads to a false sense of financial security and overspending.  But with cash, we tend to be more cautious. What’s more, when we use cash, we’re able to better negotiate prices and terms. Merchants would much prefer cash transactions since they have to pay banks fees each time we swipe our credit card and, therefor, might give you a sweet little discount for using cash instead.

Invest in Your Future

One of the best ways to put your money to work is to start investing early and often. I know it’s frightening to watch the stock market fluctuate day in and day out and yes, many saw their retirement portfolios plummet in the recession, but those who stuck with the market, are now glad they managed to recoup a big chunk – if not all — of that loss. For those in their 20s, I recommend automatically and diversely investing at least up to 10% of each paycheck in their employer’s 401(k) program. For everyone else, tuck away at least the minimum amount your company will match. Additionally, consider opening an individual retirement account or IRA at your local bank.

Insure

Put your money to work by having it protect what you cherish the most: your health, your home and your life. Insurance is part of the foundation of a sound financial life. For those seeking health insurance, if your employer doesn’t offer it, some alternative strategies include piggybacking off a spouse or partner, as some health care plans and employers extend coverage to domestic partners and joining a professional union with group benefits. Remember, you can always comparison shop for individual health insurance online. If you’re healthy and a non-smoker, you may be able to qualify for relatively low rates.

Photo source: 401k’s photostream on Flickr