What’s on your list of New Year’s resolutions? If you’re like many people, perhaps your resolutions focus on your health and include eating better or giving up cigarettes. But what about your financial health? If you feel like you are falling short of your financial goals and are looking for ways to improve your situation, here are six to-dos that can help you start the new year smart:
6 New Year Financial To-Dos
- Set up an automatic savings plan – Pay yourself first–before paying for anything else. Set up an automatic savings plan that will automatically transfer a designated amount of money from your checking account into a savings account on a regular basis (weekly, bi-weekly, monthly, etc.). An automatic savings plan is an easy way to build up savings for an emergency fund, college tuition, retirement or other large expense or long-term goal. Eventually you’ll get used to living on less, while the money in your savings account grows.
Pay yourself first–before paying for anything else. An automatic savings plan is an easy way to build a nest egg.
- Create a budget – Understanding your income vs. your expenses is key to managing your money effectively. Creating a budget will help you see the big picture. Start by determining your monthly income and then track all your expenses, even the smallest ones. If more money is going out than coming in each month, figure out what expenses could be cut down or eliminated. Read this NerdWallet article for other tips on how to create a budget.
Understanding your income vs. your expenses is key to managing your money effectively.
- Make a debt repayment plan – If you are in over your head in credit card debt, devise a plan to pay it down. Look for ways you can free up extra money so that you will be able to pay more than the minimum each month. If you are stuck in what feels like an endless cycle of revolving debt, a debt consolidation loan may be a good option for getting back on track.
- Check your credit report – You are entitled to one free credit report a year. If you haven’t reviewed your credit report in some time, checking it now is a good idea. When examining your credit report look for incorrect account balances, unfamiliar names and addresses, and other information that could be inaccurate or even fraudulent. Your credit report is used to determine your credit score so it is important that the information in your report is correct and up to date. Visit AnnualCreditReport.com to request your free credit report.
- Start an emergency fund – Many Americans live paycheck to paycheck and are financially unprepared for large, unanticipated expenses such as a car or home repair or medical bill. An emergency fund – also known as a “rainy day” fund – can help. If you do not have an emergency fund in place, now is an optimal time to begin building one. Starting small is ok. Deposit as little as $25-$50 a month into a savings account that is earmarked for emergencies only. Over time, your funds will grow, which will help you be able to pay for emergency expenses without having to rely on credit cards.
- Review your insurance information – It is a good idea to review your insurance policies every year. Look at your auto, homeowner’s/renter’s, and life insurance policies. Are you over- or under-covered? Should you raise your deductible? Are you entitled to any special savings, including military discounts? Be sure that your insurance coverages are in line with your current situation.
Taking care of your personal finances is a year-round endeavor, but January is a great time to take a fresh look at your circumstances. Evaluate where you’ve been financially, determine where you want to go, and establish the steps needed to reach your goals.