As the year comes to a close and a new one begins, there are a number of financial decisions you can make to pave for a great start to the year. You need to be smart with your financial approach from the very beginning to help you reach your goals in the end. You will encounter some challenges along the way but you just have to keep at it.
The idea is to create that habit of making good decisions when it comes to your finances. It is not a walk in the park but as you do it day in and day out, you will soon get used to it. It will soon become like second nature to you. Here are some of the smart money decisions you can make at the start of the year.
Check your credit report
There is no question that your credit score is one of the most important numbers in your financial life. It affects a lot of your money decisions from as small as opening a new credit card account to as big as buying a house. It only goes to show that you need to put in extra work in making sure that your score gives you the financial opportunities you need.
One way of doing that is to put in some time in getting and reviewing your free credit reports from Equifax, Experian, and TransUnion according to the Federal Trade Commission. This is one of the best financial decisions you can make. You need to understand that your credit score depends mainly on what is indicated in your report. That is why you need to go through your report and scrutinize every single detail.
For one, it can help you identify errors in your report which you need to address immediately. Doing so will help you increase your score. This will also give you the upper hand in curbing potential identity theft problems. If you find purchases you did not make or a newly opened credit you did not apply for, reach out to the lenders on file and report it immediately.
Revisit your long-term goals
Once you start looking at financial decisions you can make at the start of the year, you need to include a review of your long-term goals in life. The reason for this is that your long-term goals guide most of your decisions in life. You always base your financial decisions on where you want to be a few years down the road.
There are a number of ways you can manage your long-term goals. One is cutting them into smaller targets to make them more manageable. Take your emergency fund for example which you need to build up as quickly as possible. If your target for the year is $1200, you can break that down to $100 every month. That comes down to $25 a week or just a little under $4 a day.
This can simply be the amount you spend on signature coffee every day before going to work. If you switch that by brewing your own cup in the morning, you can set it aside and have $1200 at the end of the year. This can apply to other goals as well because breaking them down into smaller objectives makes them more doable.
Make the necessary adjustment on your household budget
One of the best financial decisions you can ever make at the top of the year is to start making the necessary adjustments on your household budget. If you are like most consumers, one of the biggest expenses in your budget could be your housing which is at over $18,000 according to USA Today. This includes not only mortgage payments or rent but maintenance, taxes, insurance, appliances, and even utilities.
The same survey also shows that people spend at least $400 in alcoholic beverage consumption, over $300 in tobacco, and even $2,913 in entertainment. One thing you can do is to look at these expenses and see how you can re-allocate part of it towards debt payment. This can help you get out of debt faster and even save money which would have been paid on interest and other fees.
Changing and adjusting your budget keeps you moving toward the right direction. You need to understand that change is one of the constant things in this world that is why you need to keep updating your budget. There will be times when you have more than enough and times when you live from one paycheck to another. The important thing is to adjust your budget accordingly.
Getting your will in order is one of the most important financial decisions you can make
There are things in life that we pay for hoping you never need it too soon. Your car insurance is one because you never want to be in a vehicular accident. Medical insurance can also be another thing you need to have but hope will never find a use for in the near future. When it comes to your finances, having a will is in a similar league.
You need it but hope you do not have to use it in the near future and get to live a little bit longer. However, you need to understand that life is unpredictable and you can go at any time. This makes it important to have a will to leave behind to your family. The document will help guide them how they will move forward with what you left behind. Having a will can also help you manage divorce better.
Take up a new form of exercise or sport
The Bureau of Labor Statistics shares that walking is the most popular form of exercise from 2009 to 2015. If you haven’t started yet, it is time to pick up a new sport or exercise routine. Apart from the usual health benefits you get from the activity, this is one of the financial decisions that ripple out to multiple areas of your life including your finances.
The healthier you are, the better your money decisions can be and more effective you become as you manage your finances. A healthier body can also give you the chance to take on a second job. This can help you increase your monthly income. Exercise also gives you a healthier mind helping to keep you away from mental health problems.
Pay off holiday debt as fast as you can
As you head on out to face the new year in a couple of weeks, you could be doing so with multiple holiday debt on your hands. This is why one of the financial decisions you need to make at the start of the year is to pay them off. Do not let them linger in your finances because the longer they are there, the more you pay in interest and fees.
If at all possible, pay them off once you get your statement. This not only helps you budget better but also benefits your credit score. Your credit utilization ratio goes down adding favorable points to your score. This also helps you stick to your monthly budget because holiday debt can stick with you for a long time if you do not address them immediately.
Update and keep your holiday list
Now that the holidays are over, don’t put away your holiday list just yet. You need to update it with people or even events that you missed this year. This helps you keep track of them for next year’s holiday season. People come and go in your life and it would be nice if you can update your list every now and then to reflect those changes and keep your list relevant.
There are a number of financial decisions you need to make at the start of the year to help put you on the right track. You just need to identify them and make sure that you pick out the ones that apply to your current situation.