With the start of a new year comes many resolutions, most likely related to healthier living or improving your overall lifestyle. One of the most important parts of healthy living that many people often forget is having good financial health. So the question is how you can clean up your finances now that the New Year is here? Here are 7 strategies to focus on now to improve your financial health in 2020.
1. Give your credit report the once-over
Your credit score is a significant part of your overall financial health, and a good credit score can help you get lower interest rates and allow you to borrow money when you need it. Having a poor credit score can cause you to pay significantly higher interest rates and sometimes even prevent loan approval. It is not only important to practice good credit score habits throughout the year but also to check out your full credit report at least once per year. You may find items that need to be corrected or at least know areas that you will need to continue to work on to maintain or improve your score.
2. Build up an emergency fund
Life can happen, and when you least expect it, you could be facing a life-changing event such as the loss of a job, an unforeseen expense, or a medical emergency. Being prepared financially for such a situation can help you get through it easier without having to take on more debt or fall behind on other payments. While the ultimate goal is to have at least three to six months of expenses saved, start with what you can, as putting away a set amount towards the fund will help you build it up without a significant change to your budget.
3. Tackle debt
While debt can get out of control almost any time of the year, many people accrue a substantial amount during the holiday season. If you have a high amount of debt or high-interest rates, now is the time to start a plan to tackle the debt and work towards the ultimate goal of paying it off. Start with higher interest debt and begin applying more each month to it until you have paid it off; you can then snowball that amount into a payment towards another portion of your debt.
4. Organize your financial paperwork
The early part of the year is an excellent time to get your financial paperwork organized and filed properly, so you will have it ready when needed during tax season. If you have limited space to properly organize all of your financial paperwork, consider using scanning software to organize bulkier, harder to store information digitally, such as receipts and expense reports. Just make sure that your digital files are backed up in the event of a computer problem.
5. Start making retirement planning a priority
When getting your financial house in order, an oft-neglected component is retirement planning, especially for those where it may seem like it is a long way off. However it is vital to remember that the sooner you begin to save for retirement, the more your money will grow due to compound interest. Start by figuring out how much money you will need to save in order to retire, then begin developing a plan to put away the necessary funds each month. Consider eliminating nonessential expenses that you won't miss that can be added to your retirement savings without disturbing your budget. A financial planner can serve as a great guide for retirement planning, helping you run the numbers and figure out a realistic plan of action.
6. Investigate refinancing options
If you purchased your home or vehicle when loan rates where higher, consider investigating what it would cost to refinance these items at a lower interest rate. Even if interest rates have not decreased significantly but you have seen a jump in your credit score since you made your purchase, the interest rate you might be approved for could help reduce your monthly payments while eliminating some of the interest that you would otherwise pay.
7. Create a budget and stick to it
One of the most common reasons people tend to overspend is because they have no set budget. Make a point to create a detailed monthly budget that includes most items that you typically spend money on each month, including your savings. Additionally, when planning vacations, birthdays, holidays, or other events, have a budget in mind and plan ahead so you will not overspend and end up out of budget for the month.
Make it your resolution to clean up your finances and increase your financial health for 2020. Take the steps above to help get your fiscal house in order and make the most of this year.
Holmlund Financial - Manulife Securities Investment Services Inc.
Phone (807) 274-7115
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.