The New Year is an exciting chance to set goals and plan for the future. And if your resolutions include improving your financial situation, you’re certainly not alone. In fact, last year nearly 40 percent of Americans said their goal was to save more money.
Changing old habits and building new ones can be undoubtedly tough, especially if you’re not sure where to start when it comes to reaching your goals. As you look to the future, check out our New Year Financial Checklist below. These tips, along with patience and hard work, will help you better manage your money today and plan for a more financially fit future.
1. Check Your Credit Reports.
Looking to the future and setting realistic and effective goals is easier when you know what your starting point is. This is when a credit report comes in handy. The three credit bureaus –TransUnion, Equifax, and Experian – are required to give you a free copy of your credit report once a year. This will help you to not only fully understand your situation and financial habits, but will also help you check for mistakes and fraud that could be negatively effecting your credit score.
You can order these reports online from annualcreditreport.com, which is the only authorized website for free credit reports, or call 1-877-322-8228. To receive your credit report, you will need to provide your name, address, social security number, and date of birth to verify your identity.
If anything seems wrong, you can also dispute errors through each credit bureau. Keep in mind some disputes will take longer than others. However, once you initiate a dispute, the credit bureaus are required to investigate it and report the resolution.
2. Review Your Budget
A lot may have changed in the last year – you may have gotten married, bought a home or gotten a new job. These major life events, along with many others that may come your way, will likely require you to take a second look at your spending plan and consider how it’s working for you.
No matter what your financial situation is, an effective budget is always essential to balancing long-term goals and everyday expenses. By creating a breakdown of spending, income and debts, you’ll be able to better identify wasteful spending, adapt quickly to financial emergencies and begin to make headway on your future plans.
To learn more about how to create a budget that can work for you, check out our blog post MCU’s Tips for Creating an Effective Spending Plan.
3. Start Investing
Building an investment portfolio may be sitting at the bottom of your to-do list but it’s one of the most important keys to building long-term wealth.
If you feel like building a portfolio isn’t in your budget this year, easy-to-use mobile apps mean you can begin investing small amounts of money without the use of a financial manager. Most notably, spare change investment apps, like Acorns, encourage users to invest spare change using a system they call "round-ups." These apps monitor your bank account and automatically invests the change from your daily purchases.
Other apps will make it easy to make small investments without having to pay commission fees, or keeping an account minimum.
4. Create an Emergency Fund
Expecting the unexpected can be a tall order but having a financial safety net in place will help you to more easily withstand tough times. As you start planning for the year ahead, don’t forget to start paying into an emergency fund. A general rule of thumb is to set aside 3 to 6 months' worth of living expenses that can help you stay financially afloat in case of job loss , illness or an unexpected bill.
If you already have an emergency fund, you’re not in the clear just yet. Make sure that it’s still sufficient to cover your expenses since you last reviewed your financial obligations and responsibilities. You may find yourself needing a larger fund than you initially expected.
5. Become Properly Insured
Having the right insurance is important but overpaying for it isn’t. Now is a great time to take inventory on how your insurance is working for you now and consider if it will compliment any future plans you have for the coming year. Remember, as your life changes overtime, you may need more or less coverage in some areas of your life.
Whether it’s home; auto; health or renters insurance, price shopping can go a long way it’s recommended to request quotes from at least three providers before making a decision. However, don’t let the policy’s price be your only consideration. It’s important to make sure you understand what’s covered and how much protection you’d have from a new policy.
Be sure to do your homework on each of these new insurance providers and to note the details of the policies offered. In the end, you may decide to stick with your current provider but having official price quotes could help you negotiate the best deal possible.
6. Automate Payments
Chances are you already know how hard it can be to keep your finances organized on top of your day-to-day life. If one of your goals for the New Year is to better manage your money, automatic payments could just be the answer. Setting up automatic payments for fixed monthly bills like your cell phone or cable won’t just benefit you credit score, but will also help you stay organized and relieve stress.
7. Plan Your Retirement Account Contributions
Pay yourself first. Sticking to this simple rule will help you to ensure the financial well being of your golden years. An easy way to get started is to participate in an employer sponsored retirement plan, such as a 401(k) or 403(b). These plans are especially helpful because your contribution, up to a certain percentage, is often matched by your employer. For example, they may offer to match up to 50 percent of the first five percent of your paycheck contributed to your retirement account or match you dollar-for-dollar up to six percent of your paycheck contributed.
If you already have a retirement account, now is a great time to take a look at how you can increase or optimize your contributions to better prepare you for the future.