When it comes to New Year’s resolutions, financial resolutions top the list every year. According to Statista, 30% of Americans want to live more economically. Unfortunately, the pandemic, record unemployment and a resulting recession and inflation made it difficult for many Americans to achieve this. This next year provides the perfect opportunity to renew these resolutions and get your finances back on track.
Pay Off Debt
Even if you managed to avoid the tempting Black Friday and Cyber Monday sales, you may have other types of debt, such as student loans or medical bills. You may feel weighed down by these debts and want to get rid of them, but how? The higher your credit score, the more options available to you.
- Installment Loans: Consider doubling up on payments for auto loans, mortgages, and other types of installment loans. If you can’t afford to double payments, pay any extra amount that you can. Try to prioritize higher-interest loans and the ones your family and friends may have co-signed on.
- Revolving Credit: Get into the habit of paying off your current monthly balance. Choose a pay-off strategy and stick to it. You may pay off smaller balances or higher-interest balances, first.
- Consolidating Debt: Bills add up, and so can interest. Reduce the interest you owe on your bills by consolidating your debt into a single, low interest loan. Consolidating high interest credit cards and other loan balances can help ease your monthly budget. Home equity loans and low interest personal loans are two ways you can consolidate debt and save money.
Save Money Every Month
When it comes to saving money, consistency is key. Consistent saving requires self-discipline, which takes time to develop. There are some tools that may help make this easier for you.
- Certificates: You can use these to file away a certain portion of your money for a specific period of time. Doing so allows you to earn higher interest rates than you otherwise might have if you had used a regular savings account.
- Automated Deposits: If you prefer to have ongoing access to your money but still want to develop discipline, consider automating your savings deposits. This way, your financial institution withdraws a certain portion of money from your account every month, before you have the chance to spend it.
Make a Big Purchase
Sometimes, your goal is to make a large purchase. The cost of this purchase and your available loan options may determine how you go about prepping your finances.
- College: Whether you plan to save for college for yourself or a loved one, 529 plans offer a tax-deferred option. You can use money from this type of account to pay for qualified expenses.
- Vehicle: Both brand-new and new-to-you cars depreciate rapidly. Get an auto loan at a reasonable rate and put down a down payment.
- Home: Planning on buying your first or next home? You need an even bigger down payment than a car. You also need to prep your finances, so you can qualify for a low-interest mortgage.
Start a Budget
Whether you make a high-end salary or get by on less than $30,000 per year, you need a budget. Budgeting your money today can help set you up for financial success in the future.
- When creating your budget, consider using an app to track and analyze your expenses. Once you have your spending categorized, you can then concentrate on your budget. NerdWallet is a useful tool or you can also track these figures yourself, using a spreadsheet. When you see where your money actually goes every month, it becomes much easier to decide where each penny should go, instead. You may also consider budget counseling.
- When you start your initial budget, we recommend analyzing how much you’ve spent in the past few months and where you’ve spent your money. This will tell you how much you spend in relation to your income. Once you know the expenses that are essential, like bills and your mortgage payment, you can craft a realistic budget to help you accomplish your goals.
At ProFed, we make this easy for you by sending checking account holders statements each month. To make sure you see those, sign up for electronic statements today by clicking on Statements once you log into your digital banking account via your computer or mobile device.
Plan for Retirement
It is never too early to start planning for retirement. So, if this is not yet on your financial new year's resolutions list, please reconsider. Maxing out your 401(k) at work is a great way to start saving for retirement, but it’s not your only option. Here are some other steps to consider:
- Open a traditional or Roth IRA, especially if you do not have a 401(k) through an employer.
- Before retiring, refinance loans you have not yet paid off to reduce monthly payments.
- Open a Health Savings Account to set tax-free money aside to cover medical bills that may arise.
Financial stability takes time to develop and effort to maintain. However, if you plan well, stay the course and choose good allies, you can achieve even your most challenging financial goals. At ProFed Credit Union, we provide financial tools and services that help our members achieve their financial goals. Contact us today to learn more.
