Have you slacked on your New Year’s resolutions? Or maybe you didn’t even get started? If that’s the case, remember that it’s never too late to get a handle on your finances and whip them into shape within the next six months.
How to Get Into Financial Shape Before the End of the YearJuly 19, 2018
Understanding the basics of your finances and what budgeting tools are available will unlock your ability to make smart and educated decisions. Many people don’t understand some of the more complicated topics, such as what goes into a lender’s decision to approve a loan, how to regularly update your 401(k)s and how much to save for a first home. But before you get there, it’s important to nail the basics, such as understanding money management, budgeting and building credit.
Getting a full understanding of your financial profile will help you turn your finances around in the coming months. Read on for tips that help you conquer your financial goals – and problem areas – within a year.
Understand your existing financial profile. The first step to getting a handle on your finances is understanding where you stand. That includes a review of everything from your debt, including your interest rates and monthly payments, to how much you spend on coffee to checking your 401(k). Reviewing everything will help you grasp where you currently stand, identify goals and set – or reset – your budget.
Review your bills. Are you getting the best prices for your electricity, phones, cable and miscellaneous services? Maybe it’s been a while since you last reviewed your cable or cellphone package, so take a look to make sure you’re getting the best possible rate.
Update your financial and insurance plans. Review your bank and insurance plans and policies on a regular basis to ensure you’re getting the best possible deal at all times. Make sure you are only paying for services and coverage you use or need. Always make sure you’ve filed your taxes and set up your 401(k) contributions correctly. For example, experts recommend that you raise your contribution rate by at least 1 percent every year or more when you get a raise or promotion. Since a lot of people have a set-it-and-forget-it mentality with their 401(k), the auto-escalation plan is an easy way to make sure you’re contributing as much as you should without much extra effort.
Banish credit card debt. Credit cards can be good for building credit, earning rewards and handling emergencies, but that’s it. Spending more than you can afford makes it easy to carry an ongoing balance. Unpaid debt also means you could be building interest and costing yourself more money than what you spent. When debating whether to pay for something with a credit card, the old adage of “don’t buy what you can’t afford” is a good rule. Tighten your belt to get credit debts paid off and use budgeting tools to help you calculate how much you should pay each month to pay off your credit cards in full.
Create goals. After you understand where you stand financially, figure out what you want to achieve, fix or plan for. You can’t get to where you want to be without financial goals. There are plenty of tools you can use that help you set goals based on your budget and even track your progress in real time. Whether your goal is to save for a down payment on your first home, pay off your student loan debt or pad your retirement fund, goals are essential to your financial wellness.
Reset your budget. Think beyond your annual salary. Base your budget on your take-home pay (what actually ends up in your checking account) each month. Make sure you’re setting a budget based on how much you’re bringing in, full cost of regular bills and any loan or mortgage payments. And don’t forget to set aside part of your paycheck for fun expenditures such as shopping and dining out so you won’t feel too restricted.
Check in. Mark your calendar and review these steps at regularly scheduled intervals. If you take the time to do all the legwork, don’t let it all go to waste. Everyone slips from time to time, so these check-ins will also give you the opportunity to get back on track. Whatever the cadence, make sure you’re reviewing your budget and keeping yourself honest with your goals. Using all of these tactics will help you stay on top of your finances.