Every year, we make New Year's Resolutions that we ultimately break, like losing weight or reading more books. So we came up with a few easy financial resolutions you can stick to all year, which will help you in the long run and set you up better for the next year.
Improve Your Credit Score
Your credit score has a huge impact on your financial life and impacts nearly every financial move you make from getting a mortgage to buying a car to getting a credit card. There are small things you can do to raise your score, including not missing payments, paying down your debt, becoming an authorized user of a parent/loved one’s credit card, checking your credit report for errors and not applying for too many credit accounts.
Create a Budget/Spending Plan
Setting limits on spending (and sticking to it!) will help manage your finances, and you’ll come away with more money in your pocket without having to do much. Maybe that means making coffee at home instead of buying it at your coffee shop every day. Or maybe it means only eating out once a month instead of once a week. Or maybe you’ll consolidate/remove subscription streaming services. To make the best plan for you, add up and write down your monthly expenses. Sometimes we don’t realize what we’re spending when we can just charge it to a credit card. But seeing everything on paper will allow you to see what you’re spending where and will help you determine what you can cut and how much to allocate to each area. There are even budgeting apps you can use.
Pay Down Your Credit Card Debt
Lowering your debt will not only put you in a better financial position on a day-to-day basis, but it will also raise your credit score. Your debts account for 30% of your credit score via your credit utilization rate (how much credit you are using out of your total available credit). Bringing this down will bump up your score and put you in a better situation if you need a loan.
Save for Retirement
It’s never too early to start saving for retirement, and if you haven’t started yet, start now. Planning for retirement is paramount. If your employer offers a 401(k) matching plan, take them up on it! With compound interest, wealth builds slowly year upon year, so the sooner you start, the better. Look into both an Individual Retirement Account (IRA) and a Roth IRA. There are key differences, contribution limits and tax implications, so do your research or talk to a financial adviser to determine which is right for you. But investing in your retirement now will pay off in your senior years.
Even with a retirement account, you can have other invest accounts as well. Investing doesn’t just mean playing the stock market and buying and selling every day as the market fluctuates. Look into mutual funds, index funds, CD’s, etc… Investing in slow-growing, safer opportunities is a great way to build wealth. Savings accounts are fine and are a safe way to save your money, but interest is minimal. Invested money can return 7% a year, and each year when you reinvest, that money will grow as you earn interest on interest.
With mortgage interest rates fluctuating as they are, you may want to consider refinancing before rates start to rise again. Lower interest rates mean lower total interest you’ll have to pay.
In addition to the above, consider these:
- Make a will
- Look for a better job
- Start a 529 plan
- Pay off student loans
- Automate savings
- Use expiring credit card rewards
- Review your insurance(s) to see if you can save money by switching companies/plans
- Start an emergency/rainy day fund
- Look for other income opportunities
Remember, think long-term. Nothing will make you rich overnight short of hitting the jackpot. So create a simple plan, stick to it and have a great 2023!