From the American Bankers Association
The new year is the perfect time to set new goals, as many vow to become more physically fit or get organized. The new year is also a great time to assess your finances, gain control of your spending, and commit to a new budget or savings plan. Taking the reins of your personal finances will allow you to save for the future and prepare for unexpected expenses.Get financially fit in 2020 by following these tips:
Consider treating yourself to a post-holiday gift of a financial organizing system. Alphabetized file folders or filing systems specifically for financial organization are available in January as people begin to prepare for tax season. Take advantage and start the new year with an organizational system. While you're getting organized, think about buying a shredder to keep your personal information safe from identity theft.
Create a Budget
Track your income and expenses to determine how much money you have coming in and how much you spend. If you have debt, consider establishing a budget that will help you pay down your debt while saving. Use computer software programs or basic budgeting worksheets to help create your budget. Include as much information as you can and review your budget regularly. Print several copies of a budgeting worksheet to help you get started.
- Identify how you spend your money
- Set realistic goals, especially if you plan to cut some of your expenses
- Track your spending and review your budget often
Lower Your Debt
Debt from student loans, mortgages and credit cards is nearly unavoidable. Most families carry about $10,000 in credit card debt. Spending more money than you bring in can lead to financial stress. Establish a budget to pay down debts while you save. Points to think about when cutting debt:
- Pay more than the minimum due, and pay on time
- Pay off debt with higher interest rates first
- Transfer high rate debt to credit cards with a lower interest rate
- Use credit cards and loans for purchases that will appreciate in value, like a home
Save for the Unexpected and Beyond
Pay yourself first. Saving is important; it ensures a healthy future that can endure financial surprises. No matter how old you are, it's never too late to begin saving.
- Save at least 10 percent of your income for retirement. Enroll in a retirement plan or consider optimizing an established retirement plan. Contribute at least the maximum amount that your employer will match.
- Keep three months salary in a savings account in case of emergency
- Increase your savings contributions as your income increases
- If you receive direct deposit at work, ask your employer to send a specific amount to your savings account. Because the money is put into an account before you have a chance to spend it, automatic savings plans are an easy and convenient way to save
Remember, your financial fitness is just as necessary as your physical fitness. By treating the turning of the calendar as a time to take charge of your money, you will be taking a powerful step to prepare for your future. Happy New Year!