For most of us, the start of a new year feels like a perfect time for change. Our calendars are starting fresh and we have the full year ahead of us to make those major life transformations—whether that means a new diet, a new fitness regime or simply cutting out some bad habits.

One area that people often neglect when preparing their new year resolutions is their finances. Diet and exercise are always on top of people’s lists, but what about getting financially fit? Making solid financial resolutions for the year can have a major impact both immediately and for achieving long term goals like owning a home or retirement.

With that in mind, we have organized a list of the top 5 things you can do right now to get your money back on the right track. Start the new year right by following these steps and get yourself financially fit for 2018.

1. Establish clear financial goals.

As you start planning for this year, take some time to actually figure out what you are hoping to achieve. Your goals can involve saving up towards something specific, like a new car or vacation, or around getting your finances in order, such as paying off your credit card debt or putting money aside for an emergency fund.

Whatever your financial goals may be for this year, just make sure that they are both personalized for your situation and as specific as possible. Specific goals that are focused on only a few key items can help you stay motivated and better understand what actions must be taken to achieve the goal.

For example, setting a goal of “paying off my credit card debt and saving some money for a vacation.” seems fairly straightforward but it lacks specific numbers to measure your progress. A goal like: “I want to have a $0 balance on my credit card and set aside at least $2,500 in my savings account by July for my vacation.” provides a defined target you can aim for.

Additionally, consider setting short term, medium, and long term goals to have you better prioritize and feel the progress you are making. Completing short term goals will give you the sense of accomplishment and motivation needed as you work towards the long term goals.

2. Check your credit score.

As you work towards your financial goals, it’s important to understand where your financial health stands now. Your credit score is the simplest way to get a clear snapshot of your financial health. Good credit can give you access to significantly more opportunities to help you strengthen your financial stability, such as mortgages and other loans at competitive interest rates.

Checking your credit score regularly can help you as you work towards improving your credit and keep you motivated as you work towards your goals. If you are an EarnUp customer, you can actually view your credit score for free in our Account Management platform. Banks and credit cards, such as Chase and Discover Card, have recently begun offering free credit scores as well.

Along with just your credit score, full credit reports can give you a deeper look at your financial activity, which is important in understanding your situation and check for any inaccuracies. You can run full credit reports throughout the year through one of the main credit reporting agencies: Equifax, TransUnion and Experian.  It is important to note that most of these services only allow you to check you credit report once a year for free, so check a different one throughout the year so you can keep regular tabs on your financial health.

3. Track your money habits.

Knowing how you spend your money can be very powerful in helping you achieve your financial goals. It’s very easy to spend a few dollars here and there on different things, such as coffee or after work drinks. These spending habits can quickly add up and eat up a significant chunk of your budget.  

By understanding how you spend your money, you can start making cuts and put that money towards your financial goals. There are plenty of free apps and tools that will automatically track your finances and spending activity to give you deeper insights into exactly where your money is going. One of the most popular ones is Mint.

4. Prioritize your debt.

If you have multiple types of loans, it is important to understand that not all your debts are equal. Mortgages, auto loans, student loans and credit card debt all have different annual interest rates and term lengths, which can cost or save you a lot depending on which ones you pay down first.

Often our instincts are to pay down the debts with the highest interest rates first as you will pay higher amounts of interest the longer you owe. Although this is often correct, it is important to take a look at the total interest over the life of the loan, not just the interest rate.

Consider if you will be in this loan for the full term and how accelerating payments on longer loans can shave off several years off its term, thus saving you on interest that you would be paying during these final years.

The key is to recognize that your debts can behave in different ways depending on how you pay them off. Talk to your lender or financial advisor, or try using a payment calculator to better prioritize your debts for maximum savings over time.

5. Make a plan and stick with it.

It’s very easy to make a plan, but actually sticking with it is probably the hardest part and where people struggle the most. Like any new year’s resolution, it’s easy to have a great start and then lose steam a month or two in.

Unfortunately there is no easy trick to solve this. You have to be diligent and keep yourself accountable. Try setting aside a specific time every week to review your spending, savings and overall financial goals. Having a regularly scheduled time each week to do this will help you start forming a habit.

Also know that planning your finances doesn’t have to be a dull affair. Make it a fun activity by rewarding yourself with something you enjoy, like a bottle of wine or special dessert, while you review your finances. This will help you look forward to taking that hour each week to go over your money.

Along with your weekly review, set aside times once every one to three months for a more thorough review of your goals and the progress you’ve made. Once you get in the habit of reviewing your financial habits, it will become second nature. It just takes time and discipline.

 


EarnUp blog content is for educational purposes only. Information shown is for illustrative purposes only and is not intended as financial advice. Please consult a financial adviser for advice specific to your financial situation. EarnUp makes no guarantees as to the accurateness, quality, or completeness of the information and EarnUp shall not be responsible or liable for any errors, omissions, inaccuracies in the information or for any user’s reliance on the information.

Article Photo by Bruno Nascimento on Unsplash