GOLDEN VALLEY, Minn.- Ringing in the New Year often brings with it the promise of new beginnings and the burden of self-improvement. Fueled by the nostalgia of the holidays, armed with a year’s worth of regrets, almost half of Americans are expected to make New Year’s resolutions. Dan Ament, Financial Advisor with Morgan Stanley joins us to discuss financial resolutions to make in the new year.
Financial Resolutions for the New Year
Track your finances: The first step toward financial improvement is to get the lay of the land. A minority of Americans have a budget, according to survey data from the National Foundation for Credit Counseling. Consider utilizing one of the many tools available to help you track your income and expenses to better identify opportunities to save more and / or reduce debt. Resources to research may include www.Quicken.com, www.Mint.com or one of the many personal finance apps available to track your income & expenses.
Automate where possible: One of the most easily avoidable mistakes that people make in regards to their finances is missing due dates. Often due to pure forgetfulness, tardiness can have serious ramifications on your financial life – such as missed credit card payments fostering credit score damage. Set up recurring monthly payments from a checking account to pay off your credit card each month in full. If you are a responsible user of credit cards, consider automating other monthly recurring payments on your credit card. If you research a good card, you will earn rewards while paying it off each month.
Build an emergency fund: More than half of American’s do not have a rainy day fund, according to the Financial Industry Regulatory Authority’s National Financial Capability Study. Building up some cash reserves as a safety net to cushion unforeseen expenses or job loss should be high on your list.
Reduce debt / Save More: U.S. consumers have about $1 Trillion in revolving debt. REDUCE DEBT - High cost consumer debt can become black hole that is difficult to crawl out of financially. Add to that the risk of increasing payments with higher interest rates and it becomes an even greater challenge. Create a plan to prioritize and start by paying down higher rate debts you are carrying. Accomplishing this will allow you to SAVE MORE - 1 in 4 people nearing retirement age have absolutely no money saved up, according to the Federal Reserve. Well, why don’t we take some steps to change that in 2016? Retirement obviously isn’t your only savings need. You also need to save for college, weddings, vacations, etc.
Monitor and improve your credit score: The first step in the credit-improvement process should be to get your free credit report and review it for errors. Once you’ve confirmed that everything is accurate, you can begin shoring up the weak points in your score. The grades on the Credit Analysis section of your WalletHub account will tell you what those weaknesses are. The real cost of bad credit? It is estimated that the annual difference in cost between good and bad credit is roughly $650 in credit card payments, $1,400 on your auto loan and $2,300 on a mortgage.
Sources and excerpts:
Visit www.annualcreditreport.com to request a copy of your report from the three agencies.