You may be greeting the new year with some resolutions, often pertaining to your health or lifestyle. Don’t forget that an important part of healthy living is having good financial health. Here are some strategies to focus on now to improve your financial health in 2019.
1. Give your credit report the once-over
Your credit score is a significant part of your overall financial health, and a good credit score can help you get lower interest rates and allow you to borrow money when you need it. Having a poor credit score can cause you to pay much higher interest rates and may even prevent you from getting a loan. It is not only important to practice good credit score habits throughout the year but also to check out your full credit report at least once per year. You may find items that need to be corrected or at least know areas that you will need to continue to work on to maintain or improve your score.
2. Build up an emergency fund
Life can happen, and when you least expect it, you could be facing a life-changing event such as the loss of a job, an unforeseen expense, or a medical emergency. Being prepared financially for these situations can help you get through it easier without having to take on more debt or fall behind on other payments. While the ultimate goal is to have at least three to six months of expenses saved, start with what you can, as putting away a set amount towards the fund will help you build it up without a significant change to your budget.Remember that these funds don’t always have to be in cash instruments like checking or money market accounts, but any fund that is easily liquidated. Limit the risk you take with these funds.
3. Tackle debt
While debt can get out of control almost any time of the year, many people accrue a substantial amount during the holiday season. If you have a high amount of debt or high-interest rates, now is the time to start a plan to tackle the debt and work towards the ultimate goal of paying it off. Start with higher interest debt – e.g. those high-interest credit cards - and begin applying more each month to it until you have paid it off; you can then add that amount into a payment towards another portion of your debt.
4. Organize your financial paperwork
The start of the year is an excellent time to get your financial paperwork organized and filed properly, so you will have it ready when needed during tax season. If you have limited space to properly organize all of your financial paperwork, consider using scanning software to organize bulkier, harder to store information digitally, such as receipts and expense reports. Just make sure that your digital files are backed up in the event of a computer problem. Since digital tax files take on physical space, it’s a good idea to save them indefinitely for future access – such as the purchase of a home.
5. Make retirement planning a priority
When putting your financial house in order, don’t forget retirement planning, even if your retirement is a long way off. The sooner you begin to save for retirement, the easier it will be due to compound interest. Start by approximating how much money you will need to retire, then begin developing a plan to put away the necessary funds each month. Consider eliminating nonessential expenses that you won't miss that can be added to your retirement savings without disturbing your budget. A financial planner can serve as a great guide for retirement planning, helping you run the numbers and figure out a realistic plan of action.
6. Create a budget and stick to it
One of the most common reasons people tend to overspend is because they have no set budget. Make a point to create a detailed monthly budget that includes most items that you typically spend money on each month, including your savings. Modern software solutions can help significantly. Additionally, when planning vacations, birthdays, holidays, or other events, have a budget in mind and plan ahead so you will not overspend and end up out of budget for the month.
Make it your resolution to clean up your finances and increase your financial health for 20198. Take the steps above to help get your fiscal house in order and make the most of this year.