The fresh-start effect can be wonderful. As the new year approaches, you may think about the resolutions you want to set, including improving your finances. But, like many resolutions, it’s important to consider how you’ll keep yourself motivated as that fresh-start effect wears off.
“Check in regularly,” says Ismat Mangla, LendingTree senior director of content. “Don’t set a resolution in January and forget about it until November. If you have a spouse, make a monthly check-in date to review your finances and see where you stand. Or put a reminder on your calendar to check in regularly and track progress.”
With that in mind, here are four financial resolutions to consider.
No. 1: Tackle your high-interest debt
“With interest rates soaring, now is a great time to focus on paying down high-interest debt, like credit card balances,” Mangla says.
The first step is determining how much you owe and scrutinizing your various interest rates. Then you can consider which payoff strategy feels the most comfortable for you to start chipping away at that debt.
“You may consider the snowball method, which means paying off the smallest balances first,” Mangla says. “Perhaps your goal is to pay down your three smallest balances by a certain date. Another option is the avalanche method, which entails paying off the debt with the highest interest rates first. You can use a credit card interest calculator to determine how long it’ll take to get down to zero, and then make paying that amount down your specific goal for the new year.”
Note: Those with a lot of high-interest debt may find it helpful to speak with a free credit counselor. The National Foundation for Credit Counseling (NFCC) could be a starting point.
No. 2: Set small, specific savings goals
“Be specific,” Mangla says. “Set small goals. Don’t say ‘I’m going to save $10,000 for a new car’ or ‘I’m going to build up my retirement savings.’ Instead, choose a small amount you know you can manage monthly and commit to saving that. Maybe you put $50 in a high-yield savings account every month. Doing that consistently will reap rewards. Often, it’s just what you need to be encouraged to increase savings down the line.”
Another way you could implement this type of goal is to set up sinking funds. These are savings accounts you plan on regularly tapping for expenses that don’t happen every month. (Think: car maintenance or annual subscriptions.) Dividing those costs over a year can help give you some financial stability in your budget.
Either way, timing auto-transfers with (or after) paychecks can be extremely helpful since you wouldn’t have to worry about letting the goal fall to the wayside or paying overdraft fees.
No. 3: Increase your credit score
Credit is the gateway to a lot of important financial tools and opportunities. Raising your score can help if you have multiyear goals, like buying a house. The key is to know what steps will have the most impact.
For example, FICO weighs payment history (35%) and amounts owed (30%) more heavily than your length of credit history (15%), credit mix (10%), and new credit inquiries (10%). Focusing on those first two factors — by setting up autopay for your various debts and payments and lowering your credit utilization — is almost certain to be better for your credit score.
No. 4: Talk to a financial professional
If you feel you don’t know what goals would most benefit you, a professional’s opinion could help.
“Meeting with a financial planner or advisor can be a good goal,” Mangla says. “This person can help you audit your finances and figure out where there might be gaps. Perhaps you need to solidify your investment strategy, or maybe your insurance coverage is lacking. A meeting with a financial planner can help set you up for a more solid financial future.”
Another plus is that, unlike many financial goals that require long-term strategies, setting a single meeting is quick, attainable and specific. That could provide the boost you need to make it through the year.
This article originally appeared on LendingTree.com and was syndicated by MediaFeed.org.
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7 killer ways to simplify your financial life
The simpler your financial life is the more secure it will be. When you spin lots of plates., you increase the odds of having a few of them fall and break into a million pieces.
I’m not suggesting you sit home, bury your head in the sand and keep your money under the mattress.
As Albert Einstein said, “Make things as simple as possible, but not simpler.” What follows are 7 simple ways to streamline and expand your financial life at the same time. Let’s get simplifying.
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Have you ever forgotten to pay a bill? I have. What irked me was that I had the money but neglected to pay the bill because I wasn’t organized and overlooked it as a result. That was dumb.
I failed to live up to my promise to pay the merchant and I dinged my credit score needlessly. This was over 25 years ago but it still bugs me.
Well, I promised myself it would never happen again and it hasn’t.
The reason? I use auto pay for everything possible. Some people have credible concerns about security and I understand that.
I’m not worried about it and I’ve never had a problem with maintaining the integrity of my online security.
And because my creditors are paid automatically I have the comfort of knowing that all my bills are going to be paid on time. That far outweighs the slight security concerns I do have.
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While automating bill payments is my favorite financial simplification tool, a close second is minimizing the number of bank accounts and credit cards I have.
I keep one business card and one personal credit card. The same goes for bank accounts – one for business and one for personal. Some people need more than that… but most do not.
Because I only have two credit cards it’s easier to review and reconcile my statements. That gives me a simple and quick way to review all the charges on the cards.
If I had 5 cards I probably wouldn’t be so meticulous. But since I have so few cards, I have no excuse.
As a result, I review each charge very carefully and find more mistakes that could have been overlooked. So this move saves me time and money. Yum!
What’s true about credit cards is even truer regarding bank accounts. Because I only have one bank account for my personal life and one for my business, it’s a snap to see what I’m spending each month. And I only use one bank for both personal and business.
In addition to tracking my expenses through software, I also look at my bank account to get a big picture overview.
As I’ve explained before, if I look at the “total withdrawals” number on the bank account, it summarizes my total outlays for the month. Very quick. Very simple. Very nice.
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Your next step to a wonderful and simple financial life is to consolidate your investments. There is no good reason to have personal investment accounts all over town.
I suggest you keep all your personal accounts at one custodian under one account number and maybe one other account for all your IRA’s.
If you are self-employed, you might also need a SEP or Personal 401k and if you are employed you might also have a 401k or 403b. Definitely speak with your tax advisor before taking action just to be safe.
You don’t have to sell anything. You just consolidate all the investments you hold under the same title into one account. How cool will it be when you don’t have to worry about where your money is because you know?
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You can easily automate a great deal of your financial life but not everything. Investment reviews and estate planning are two such items that really don’t lend themselves to automation. That’s why I use a tickler system.
I have an electronic calendar that reminds me to review my investments and estate plan periodically. I can set this up years in advance if I so desire.
What I love about this is that I don’t have to remember to do anything – I get an automatic reminder to take care of business when it’s time to do so.
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I mentioned the importance of solidifying your credit cards and bank accounts. Once you do that it will be easier to track your spending – the key to financial security.
I strongly recommend using a software package to track your expenses and to budget. But regardless of how you do it, just make sure you use a system that is easy and (dare I say it) fun.
One of the most important criteria for me is the ability to download bank and credit card transactions automatically into the software. That saves me time because I don’t have to input the data manually each month.
If you automatically download transactions you should be able to track your spending in less than 30 minutes a month – and that includes reconciling your accounts. That’s a lot of peace of mind in exchange for very little time Pilgrim.
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You can easily automate a great deal of your financial life but not everything. Investment reviews and estate planning are two such items that really don’t lend themselves to automation. That’s why I use a tickler system.
I have an electronic calendar that reminds me to review my investments and estate plan periodically. I can set this up years in advance if I so desire.
What I love about this is that I don’t have to remember to do anything – I get an automatic reminder to take care of business when it’s time to do so.
Depositphotos
If you already do the items I mentioned above, you won’t need this last tip. But if some or all of this is new, you’ll need an implementation schedule.
There is a lot of information I just shared with you. It will take a little time to implement everything.
No worries. Just take out a calendar and write down when you are going to put these tips into practice.
Rather than getting frustrated by the “complexity” of simplifying your financial life, break these tasks down and schedule the time to implement one item each week.
I’ve found that by simplifying my financial life using the steps above, I have a lot more time to do the things I really want to do.
Also, I have much more control over my finances and I end up making better investment decisions too.
Is your financial life as simplified as it could be? How do you know? Do you think any of these ideas would be helpful? What else might work?
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This article originally appeared on WealthPilgrim.com and was syndicated by MediaFeed.org.
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