Get Your Financial House in Order This Year
8 Ways to Achieve Your Financial Goals
The New Year brings renewed optimism and plans to start fresh. But for every well-intentioned resolution made, we’ve all set half-hearted resolutions that we fail to keep by spring. This year, start by making resolutions that have a substantial and meaningful impact on your life: resolve to build a solid financial foundation.
Here are 8 simple resolutions to set yourself up for financial success.
1. Update your retirement contributions.
A 1 percent increase in your retirement plan contributions can have a major impact on your long-term savings. If you receive an end-of-year raise, put that money towards your retirement savings. Either way, in 2017 you’ll be one year closer to retirement so be sure to maximize how much you’re putting into your 401(k) plan.
2. Slim down your wallet.
Rethink all of those credit cards weighing down your wallet. Compare the interest rates, annual fees and perks for each card, then close high interest accounts or those offering rewards that no longer fit your needs. It’s a myth that leaving cards with a zero balance open shows healthy credit history. In fact, a high credit line can negatively affect your credit score. If you close multiple cards with remaining balances, consider consolidating the total balance to one card and look for programs that offer free balance transfer.
3. Create a plan to be debt free by 2018.
Whether you have student loans, credit card debt or a mortgage payment, total monthly debt should generally not exceed 36 percent of gross income. However, no matter if you’re above or below the 36 percent figure, it’s important to minimize debt and develop a plan to pay it off. Start by creating a budget and prioritizing necessary bills, then allocate a set amount to pay towards debt. Consider a budgeting tool to help see where your money goes – and more importantly what can be cut and used to pay down debt. Once you meet the minimum payments for loans and other debt, use a laddering method to pay more towards your bill with the highest interest rate. If multiple loans have the same high interest rate, start with one that has a lower balance so you can pay it off more quickly. Paying off a loan in its entirety, especially one with high interest, is a huge personal and mental victory that can help you feel like you're making progress
4. Reevaluate your insurance policies.
When you first signed up for insurance (auto, home, life, health, etc.) it was likely structured to fit your needs at the time. But do your policies fit your current needs? If you have homeowner’s insurance, have you done major renovations to your house recently? If so, make sure your policy covers the full value of your home. If you have auto insurance but work from home more frequently now or have switched jobs and are closer to your office, update the average monthly miles on your auto policy. And make sure your policy beneficiaries are up-to-date. As you make changes to your insurance policies, check with your financial institution to see if they offer member discounts for auto, home and life insurance. Credit unions often offer member discounts on a variety of products and services.
5. Make financial literacy a family priority.
Creating financial stability is a team sport. Each member of your family should play an active role in achieving financial wellness. Make sure that everyone is involved in creating a basic budget, developing savings and managing expenses and debt. For children, lay a foundation early on to develop a lifetime of good financial habits. Open a custodial account in their name at your financial institution and use everyday teachable moments to help them understand saving and budgeting.
6. Rebalance your investment portfolio.
Work with a trusted financial advisor to review your asset allocation annually and ensure that it aligns with your savings goals and risk profile. Research shows that a diversified investment mix, including stock and bonds, helps smooth the effect of market ups and downs. If you don’t already work with an advisor, your financial institution may offer free, personalized guidance.
7. Closely review your bills and financial statements.
According to WalletHub, a survey of 35 of the largest banks showed the average customer pays $470 in fees each year. To avoid paying unnecessary charges, review your bank’s monthly balance requirements or switch to a credit union, which traditionally have lower fees. Also review your monthly bills to see where you can cut back. You may be paying fees for premium TV services without evaluating exactly what you’re getting, which means you may be paying for more than you need or use. Take a close look at the services you pay for each month and see what you might be able to trim. People assume that utilities are another area where rates are set in stone. However, in today’s environment companies may be willing to negotiate your rate to avoid losing you to a competitor.
8. Sign up for auto pay features.
Save time by signing up for automatic payments and automatic saving features offered by your financial partner. Reoccurring bill pay can help you avoid late fees or missed payments – and in some cases – save money. Prioritize paying yourself for savings and retirement by setting up automatic transfers to your savings accounts. Each month, direct a portion of your income into your savings account.
Keeping your financial house in order is just like maintaining your home – it’s a process, it takes time and making it a priority will pay off in the long run.
Kim Mangrum is the Senior Vice President, Chief Member Services Officer at Point Breeze Credit Union