The new year is here, and your resolutions are probably well underway. While you may set goals to get more physically fit, it is also important to consider your financial fitness going into the new year. If your finances are not where you want them to be, or maybe they need a little tune-up, the six tips below will help you get your finances in shape.
1. Cut Back Where You Can. Seriously.
One of the first steps toward a healthier financial future is spending less. If you take the time to look hard at your budget, odds are you can find some excess that you can easily trim off without feeling a pinch. Start with your non-essentials, such as subscriptions. Do you really need that many extra movie channels and limitless data? When was the last time you shopped around to compare prices? Next, delve into spending items such as clothing, alcohol, groceries, and entertainment, and see if smart shopping or more date nights at home can help free up extra money each month.
2. Tone Up Your Debt
Odds are, the holidays have increased your credit card bills. Do not let that debt snowball higher than it needs to by accruing interest. Start with your highest interest rate card, and set a larger payment in your budget to begin lessening that total. Once it is paid off, use that same payment to start tackling your next high-interest debt, and so on. A critical part to remember is that when paying only your minimum payment, it will take you 10 years and a significant amount of interest to pay off your card, so always pay more than the minimum if you are looking to pay off debt.
3. Whip Your Credit into Shape
Your credit score can affect many aspects of your financial life. Whether you are looking to buy a house or car or to take out a loan to start a business, your credit score will be used to determine how much interest you will pay and how likely you are to even get those funds. Unfortunately, many people neglect their scores until they need them, and at that point, it can be difficult to improve quickly. Keep your credit card balance far from the limits, be sure to make payments on time, and monitor your score for negative marks.
4. Load Up on Savings
Once you have trimmed the fat off your budget, you will want to put some of that into savings. One goal to start immediately is creating an emergency fund. Surprise repairs, medical bills, and layoffs can damage your financial health if you are not prepared for them. Having this fund available for these times can lessen the blow and help you stay on top of your bills so you do not fall behind.
5. Put Retirement Savings in Your Routine
Saving for retirement is critical to your future. Many people do not save enough for their retirement or wait so long that they stress their budget to meet their goals. Make it a point this year to focus on your retirement goals and find extra funds that you can put into your account so that it has the necessary time to grow as it should. Find out if your company matches contributions, and if so, try to put in as close to the amount they will match as possible. If you've already done that, your next step is to evaluate tax and investment diversification within your retirement plans. That's when scheduling time to speak with a financial planner can be especially helpful.
6. Start a New Investing Routine
Investing is the quickest way to grow your wealth, but many people are afraid to enter the world of investing because they are afraid of losing money. Others are under the misconception that you must invest a lot of money when the truth is that you can begin your investment journey with as little as $100. Start small so you can get the hang of it, and if you have more money to invest, consider meeting with a financial planner who can help you pick appropriate investments based on the purpose of your money, your risk tolerance and your timeline for reaching specific financial goals.
Improve your financial health this year by taking small steps, focusing on changing your daily habits and ultimately grow your wealth toward a more secure financial future.
This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.