As the newness glow of resolutions fades into February, you’re probably already falling back into your habits of yester-year. If one of your intentions was to be better with your money, we want to help you make this the year you take your finances to the next level. So here are some simple steps that can help you keep the momentum and motivation that you had on the first well into the rest of the year:
1. Save More, a Little at a Time
It’s not easy to go from saving 5 percent of your salary to 20 percent overnight — that would be like trying to bench press 150 pounds the day you start your “get in shape” resolution. But just like weight lifting, you can work up to a big number over time.
Financial hack: Automate your savings (if you haven’t already), and up the amount you save by small amounts, like 1 percent at a time until you’re saving about 20 percent of what you make. To up your savings game, you can set up “goals” in our Plinqit app that lets you set aside small amounts regularly, or on a schedule you choose to help you save money. It’s customized to fit your needs, so you can set up savings goals for something fun like travels or a drone and then some more conventional savings like for the holidays and your end of the year property taxes. It’s really up to your lifestyle and how you want to use it which is why we love it (plus, it’s free!). Download the app and start saving today!
2. Be More Tax-Efficient
Sure, you do your taxes every year. Maybe you even itemize deductions to help lower your tax burden for more than what the standard deduction would provide. But are you being strategic about your taxes — for both now and the future?
Financial Hack: There are many strategies you can look into to be more tax-efficient overall, so it’s worth doing a deeper dive to see where you’re potentially missing out. For instance, how you save for retirement can make a big difference in what you’ll owe in taxes today and in retirement. There are also tax-friendly accounts that can help you with other goals like saving for future college costs or covering health care expenses. Talking to a financial advisor can show you different strategies for your financial plan that can simultaneously help you work toward your goals while keeping tax efficiency in mind.
3. Be Wise About Your Debt
Not all debt is bad. Good debt, like mortgages, can ultimately help you grow your net worth or reach important personal goals. Bad debt, on the other hand, usually has a high interest rate and doesn’t provide much of a benefit to your financial situation. Whether you’re repaying credit cards or taking on a mortgage, together we can be more strategic about your debt in 2020.
Financial Hack: Create a plan when it comes to taking on debt or paying it down. For example, mortgages are at historically low rates. And with rising home values, 2020 might be a great year to trade up to your dream home — or refinance your existing mortgage, borrow some extra and get started on that big home renovation you’ve been thinking about. Provided the new payment works within your budget, this can be a way to use debt to your advantage and turn your home into a place where your family will make wonderful memories.
BUT if you have credit card debt, resolve to use a strategy to start paying it down. Some people use strategies like the debt avalanche method (paying down the highest-interest-rate debt first) or the snowball method (paying off the lowest balances first) that can often help you get out from under your debt more quickly. At the credit union, we believe that debt is not a life sentence, and sometimes just talking about your situation with an experienced Member Services Consultant can lead to simple solutions like Credit Card Balance Transfers or consolidating your debts into one monthly payment.
4. Update Your Financial Plan
As your life changes, the financial plan that you made a year or two ago (or further back) may be less and less relevant. It’s important that your financial plan reflects where you are TODAY to get you where you want to be in the future.
Financial Hack: If you don’t have a financial plan, let’s get you one in 2020. If you do have one, make sure you check in with your financial advisor this year to make tweaks as you go through changes in your life. That could be small moves like updating your budget to something bigger like funding a new long-term goal.
And don’t overlook certain tasks that may be necessary, like updating your insurance. For instance, a big home renovation means you may want to increase your homeowner’s coverage; or if you got a big raise, you may want to increase your life insurance.
5. Increase Your Credit Score
Your credit score is used affects every aspect of your financial life and is used by lenders to determine whether to loan you money and at what rate (how much you’ll be paying in the long run). Basically, the better your score, the more you save. Well likewise, your credit report shows financial activity associated with your name. If you’re not checking them regularly, you won’t find out that someone has stolen your identity until it’s too late.
Financial Hack: Take the time to familiarize yourself with your credit score by checking it regularly. The credit union offers 24/7 free access to your daily credit score and monthly credit report within the Mobile Banking app. This kind of access allows you to see what influences your score and receive customized tips on ways to improve it. You’ll also receive notifications if something wacky happens like an open line of credit you didn’t apply for and could possibly be fraud. But most importantly, pay your bills on time (payment history is 35% of your score) and keep your balances low (capacity is 30% of your score).
6. Enjoy Your Money
Sometimes resolutions can have a bit of a negative connotation. It’s more enjoyable to sleep in and eat a custard-filled donut than to hit the gym and have a salad. But getting in shape doesn’t mean a diet of nothing but dry greens. The same is true with your money: When you’re taking the right steps to reach your financial goals, you may find that you’re more confident about spending your hard-earned money on the things you value.
Financial Hack: Don’t let getting your finances in shape come at the expense of enjoying yourself. Financial planning — like so many things in life — is all about balance. Sure, you might not be able to go out for nice dinners every day, but a few times a month shouldn’t be out of the picture, if it’s important to you. Utilize the technology that you keep at your fingertips and track your spending habits, set goals and alerts, automate when you can, and together, we can find the right financial balance so that you can tackle your future financial goals and live the life you want today.