Almost everyone makes some sort of New Year’s resolution. It’s a sure bet most of your peers resolved to better their physical health this year. We all know proper diet and exercise are the keys to physical wellness, but many of us are lost when it comes to finances. Topics like eliminating debt and refinancing are intimidating, even for those who manage their own business. Here are five New Year’s resolutions to help improve your financial health in 2019.
Start small, but start saving
This is one of those few cases where it’s okay to be selfish. Before you start spending your hard-earned dollars, pay yourself first. Every time you receive a paycheck, put a set amount in a savings account before you are tempted to spend it on anything else. Chances are if you instruct your bank to automatically move this amount into savings as soon as your paycheck is deposited, you’ll barely even notice.
Setting aside even a small amount, maybe five or 10 percent of each check, starts a habit of saving rather than spending. Once you get accustomed to putting a little away, saving for retirement or your children’s education seems less daunting. For those more concerned with the here and now, always remember everyone should have at least three months worth of emergency savings at all times.
Keep track of your spending
Just like you might count calories, you’ll only be financially healthy if you know where your money is spent. I recommend a budget for everyone, even for those without excessive debt or overwhelming bills. Most banks have tools that make automatically calculate how you use your credit or debit card, and there are dozens of budgeting apps for smartphones that are much more convenient than old-fashioned bookkeeping software. Even the government offers a free-spending tracker survey. Fill it out at the end of the week, and better understand how you divide up your income.
Invest in your home
It’s your most important expense and biggest source of equity, so take care of your home and property. Keep up with maintenance if possible, and mend small defects before the damage gets too burdensome. Of course, unexpected repairs are often extremely costly. If you haven’t already, consider investing in a home warranty. These home protection plans cost as low as $25 a month and they could save you thousands of dollars in the long-run. Instead of paying full price for a home repair or new appliance altogether, you’ll pay a small service fee.
If you’re considering moving soon, you might find it counterproductive to put more money into your current property. However, spending a little extra cash and free time on home improvements this year could improve resale value by a long shot. Upgrading old appliances, landscaping, replacing worn carpet, and remodeling the kitchen or master bathroom are all valuable projects to consider. If you’re not ready to sell, then consider adding insulation or replacing appliances with energy-efficient models to save money on utility bills.
I encourage everyone to improve their credit, or at least know where their credit score stands. Nothing is more embarrassing than trying to get a loan and finding out your score is too low.
Every American is entitled to one free credit report annually by visiting annualcreditreport.com, which is authorized by federal law. The site is managed by the three major credit bureaus—Equifax, Experian, and TransUnion—and provides an up-to-date picture on your credit standing. Just like a preventative health screening, it’s always better to know there is a small problem before a more serious condition develops.
Credit scores range from 300 to 850, with anything over 750 consider excellent. Once you know your score, there are several ways to begin improving it.
The first, and easiest way to improve your credit score is to pay every bill on time. Even alone late payment has the potential to ding an otherwise healthy score. Also, avoid over-utilizing your credit. Carrying large credit card balances, even if you pay them off regularly, and having too many loans are all red flags for credit bureaus. Applying for too many credit cards in a short period of time also lowers your score significantly.
Start planning for retirement
Even if you are years from retirement, start thinking about it today. Get a retirement account. If you start putting away a mere $200 a week in your 20s, you’ll likely be a millionaire by the time you retire at 67.
Research the different type of IRAs and 401ks and take advantage of any employers that match contributions. Even if you fund your own Roth IRA, as long as you wait to retirement age to withdraw the earnings, you won’t have to pay taxes on them.
If you are closer to retirement age, it’s wise to start considering how much you’ll need to live comfortably. Most experts believe it takes 75 to 80 percent of current income (what you live on after taxes and retirement plan contributions). Even if you don’t rely on a financial advisor, use tools to see where you currently stand when it comes to retirement. This retirement savings calculator from Kiplinger.com will get you started.
New Year’s resolutions are often broken, and if you get a little behind one month or fail to save as much as you planned, don’t feel discouraged and give up. Also, don’t try to put away too much money at once and create unsustainable expectations. Changing bad financial habits mirrors dieting. Those who overdo it may reach their goals quickly, but in the end, fall into the same bad habits. Keep track of your spending and save a little at a time, and you’ll be astounded by how quickly your financial health improves.
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