Did your midnight toast include a resolution to improve your financial health?
2018 gives you the chance to make a fresh start and simplify your financial life. We've put together some tips to help you keep up with your bills, track your spending and really use your money for things you really want. Here's what to do.
Get on a strict budget
If you want to get ahead of your finances it's extremely important to know where you stand and create realistic strategies to meet your financial goals and objectives now and in the future. You may think budgeting is old school but it's still the best way to map out ways to help you manage your income and expenses. If you already have a budget make sure you review it to make sure it worked effectively for you in 2017.
Don't make budgeting time consuming or complicated. All you have to do is download a budgeting app to your mobile device that lets you track your expenditures. When we say track your expenditures, we mean everything you buy with credit cards, debit cards and cash. What you will find after even a month of tracking is the truth about where your money is going so you can plan for future expenditures.
Review all your statements
Make sure you set time aside monthly to review all your bills and statements. This is a good time to look for things you are paying for but no longer need or especially for things that you can cut back on. A good online app that can help discover interest increases or add-on charges or even auto-renewing subscriptions is Truebill.
Check out your credit union's online money management tools
Credit unions offer online tools to help with your financial management . How can I save for that hot sports car, that dream home or those toys for the boys? How much down payment do I need to save for that shack at the shore? What type of investment is the best for me? Play with their calculators to make your financial decisions easier. And if you want to set up a budget and track your spending take a look at their FREE personal financial management software which can aggregate all of your financial relationships and help you set goals.
Financial calculators will help you understand APRs, APYs, amortizations, and the power of money. Just go on your credit union website and select a category that peeks your interest:
Always prepare for the unexpected
As we all know, life can throw you some curveballs. Life's challenges like the loss of a job, or medical issues can leave you drowning in a sea of debt. As I'm sure you have heard before, it's essential to build an emergency fund that can cover three to six months of expenses. Even if you can save only a little each month, you can grow a financial protective cushion.
Cut loose of debt
Are you that person that makes just the minimum payments on your credit cards or other major debts? Did you know this means you're paying mostly interest and barely even shaving away at current balances? One effective method for reducing debt is to concentrate on your highest-interest balances first, while still making timely smaller payments on all other commitments. When you have your high interest debt paid off, concentrate on the most expensive remaining balance, and continue this way till you're debt free.
When your financial obligations are truly out of control, combining your debts into a single payment may provide the relief you need. Streamlining multiple debts into one single lower monthly payment can help you pay off your bills sooner. Your options include home equity, personal loans and zero-interest credit card balance transfers.
Make the most of tax deductions
Taking advantage of appropriate tax deductions can help you prevent paying more tax than absolutely necessary. You may qualify for tax deductions including:
- Interest deductions for mortgages, home equity financing, business financing, and student loans.
- Deductions for taxes already paid, including sales tax, foreign taxes and self-employment tax.
- Home office and business insurance deductions.
- Deductions for charitable donations.
- Pre-tax contributions to IRAs and 401 (k) plans.
Open another checking account for intermittent expenses
If you have bills that pop up periodically like insurance payments, quarterly taxes, etc. open up a second account for free at your credit union and use it to house money for those sporadic payments that arrive quarterly or even annually. For those intermittent payments it's good to put away a portion of those payments every month and when you need to make those outflows it won't put a strain on your finances.
Re-evaluate your assets and investments
Life can change rapidly, so it's important to review and change your retirement accounts on a regular basis. It's also smart to review your estate plan and make sure your will, insurance policies and beneficiaries are up to date.
Make sure you have money to spend
While you are creating the plan to maximize your financial goals, make sure you allow yourself money to spend on incidentals like coffee, movies or eating out. Remember, you can't sacrifice everything to improve your financial health for the future.
Financial Health = a Happy Life! So, if you start off the New Year with a little financial housecleaning it will appear over time that the things that used to seem out of reach become affordable, and every unexpected expense won't be catastrophic. If you follow these tips you can build your future tailored to your specific needs. The changes may be gradual, but by this time next year you will be able to toast your financial wellness.