Managing your finances is a bit like managing your health. It's important to set specific goals, maintain healthy habits, and give yourself regular "checkups" to monitor your progress. The start of the year is the perfect time to do just that. These 9 strategies can help:
- Create a Monthly Budget
A practical budget doesn’t guarantee financial well-being, but it does give you a clear set of directions. A budget plan is a great way to control spending – and create more opportunities to save – by allotting different amounts of your monthly income to different spending categories, from essentials (such as housing and groceries) to nonessentials (such as dining out and that amazing pair of shoes). One popular budget is based on the 50/30/20 rule, which commits 50% of after-tax income to needs, 30% to wants, and 20% to debt repayment and savings.
- Track & Reduce Spending
Whether you use pen and paper or a sophisticated app, keeping an eye on your spending is key to creating an effective budget, sticking to your budget, and finding ways to reduce expenses. Unused gym memberships, subscriptions to extra magazines and streaming services, and that $6 latte you buy on the way to work are all good opportunities to cut wasteful spending.
- Save Time With Online Tools
Financial well-being isn’t just about how much you save. It’s also about taking the hassle and stress out of managing your finances. Take advantage of online and mobile banking tools and money management apps to easily monitor and manage your accounts on your time. You can also simplify your finances by setting up automatic bill payments and monthly transfers from checking to savings.
- Make a Plan to Pay Off Debt
Carrying debt can feel like a huge weight on your shoulders. Creating and following a plan to conquer debt could be one of the most important New Year’s resolutions you ever make. Two popular debt reduction strategies are the debt avalanche and debt snowball methods. The first focuses on paying off the highest-interest debt first, and the second focuses on knocking out the smallest balances first. You’ll need to compare the merits of each strategy to see which could work best for you.
- Consolidate Existing Debt
Looking to pay off debt faster? Consider consolidating balances with a low-rate personal loan or transferring high-interest credit card balances to a low-APR credit card.
- Create an Emergency Fund
Experts recommend saving three to six months’ salary (or more) in case you lose your job or need to cover an emergency expense. If saving that much feels overwhelming, start with a smaller goal of $1,000 – enough to cover a car repair, out-of-pocket medical expense, or new refrigerator. Once you’ve saved that much, set a higher amount to save toward.
- Review Your Investments
New goals, life changes, and shifts in the market may affect your portfolio or investment goals. Study your investment statements – or better yet, schedule a meeting with your financial advisor – to find ways to better meet your short- and long-term objectives.
- Boost Retirement Contributions
This year, commit to adding more to your 401(k), IRA, or other workplace retirement plan. If your employer matches contributions, make sure you’re contributing enough to take full advantage of this valuable perk.
- Check Your Credit Report
Everyone’s entitled to a free credit report each year from the major credit-rating agencies. Be sure to review yours to spot potential errors or issues on your report and see if you should take steps to improve your credit, which can help you enjoy more favorable financing terms and better opportunities down the road.
Your Year-Round Financial Partner
As a member-owned financial institution, Dover Federal Credit Union is committed to helping our members achieve greater financial freedom, year after year. For more valuable financial tips, check out the free resources available through our P3 Financial Literacy Hub.