Financial resolutions are among the most popular resolutions made every year.
Carl Carlson from Carlson Financial gave tips on what resolutions are best to prioritize.
A lot of people say that want to get into better financial shape this year, but for many they don’t know where to start.
The first thing he encourages you to do is make a realistic budget and stick to it. Go back and look at last year’s spending to get an idea of what you actually need. You should also prioritize expenses in order of importance. Cut out the lowest ones until you get to a point where your take home pay exceeds your spending. Finally, figure out how to make it work for you – Mint is a great app/website for tracking expenses and setting goals. Others may need to put cash in different envelopes to make sure they don’t go over budget.
Once you get to a point where you have some money left over you might be torn between paying down debt, saving for a child’s education, a house, retirement, etc. Look at the interest you are paying on debt. If your rate is in the double digits, pay that down as quickly as you can.
Getting rid of those payments will free up future cash to do other things with and relieve the burden of that debt. If your interest rate is low, (less than 5%), and the debt doesn’t bother you, you shouldn’t necessarily be in a hurry to pay it off, Carlson said.
For someone who has no debt or their debt is manageable they could put their money in an emergency fund.
54% of Americans do not have an emergency (rainy day) fund but we all should. At least 3-6 months worth of expenses set aside. You may consider splitting the discretionary money between an emergency fund and investing for another objective, such as retirement or education. The sooner you can get your money working for you, the better, Carlson said.
What else can someone do to get in better financial shape? Carlson says to monitor your credit – a lot of institutions are providing your FICO score on a regular basis. Learn how to increase that number and actively try to do those things, so that your credit score is never an obstacle to you down the road.
For example, you might be using too much of your available credit. If you can’t decrease the debt very quickly, try increasing your available credit. Second, stay on top of payments and third, don’t take out a new credit card, which will bring down your average credit history.