Financial New Year's Resolutions

Turn the page on 2020 (whew, finally!) and resolve to brighten your financial future in 2021. Your new chapter begins with five financial New Year’s resolutions that are (yes!) actually achievable.

1. Throw out your budget. Seriously. For many of us, budgets fall just below diets in effectiveness. We aren’t good at budgets because we don’t know where our money goes in the first place. So, throw out your budget and resolve to track your spending every month instead. Just by doing this, you will probably recognize one or two areas where you can cut back.

2. Borrow like a boss. You can save money in the long run if you shop carefully for the right loan when purchasing big-ticket items like a new home, car, or education. For example, a mortgage interest rate that is lower by even a fraction of a percentage point can lead to thousands of dollars in savings over the life of the mortgage.

3. Dial down your use of credit. If you can’t pay for an item in cash, you should make it a habit to borrow money or use credit primarily for things that provide long-term and lasting value (hello, college expenses) but not for things you really can’t afford (that post-pandemic trip to Tahiti). Try to pay your entire credit card balance each month to avoid finance charges, and make the payments on time to avoid late payments.

4. Boost your credit score. Kick off the new year by checking your credit scores. You’re entitled to a free credit report each year from the three main credit reporting agencies. If you want to improve your scores, be sure to pay all of your bills on time, every time. Try to make at least the minimum payment, as missed payments can lower your scores. And, be aware that applying for several new cards or loans in a short period of time may lower your credit scores. If you’ve been affected by the pandemic, learn about accommodations that may be available to you so that your credit scores are not damaged.

5. Raise a glass to the future. As we bid a not-so-fond farewell to this year and welcome better days ahead, why not dream big and turn your attention to saving for an ideal retirement? Increase your 401(k) contribution by one or two percent every January, and every time you get a raise. If you don’t have a 401(k) through your employer, consider setting up an Individual Retirement Account (IRA). A financial advisor can assist you with an IRA, and help you make a long-term plan to get you where you want to go. Cheers to that!