5 Important Financial Tasks You Should Tackle Before the New Year
Does your list of New Year’s resolutions involve improving your personal finances? Effective money management requires creating a game plan and conducting regular check-ins to help you meet your goals. As the end of the year approaches, this is the perfect time to evaluate your situation and set yourself up for success in the new year. Take control of your finances with these five steps.
1. Audit your spending.
Did you overspend this year, or were you disciplined about staying within budget? Look at categories or times of the year you overspent, and see if you can find a pattern. For instance, did your spending go up during June through August due to summer travel? Are you consistently dropping an extra $20 on coffee each month? See if you can budget for these expenses to avoid surprises, or if they’re hurting your wallet, commit to cutting back on unnecessary spending. If you don’t have a budget that you review regularly, create one now. It will give you a clear picture of your income versus outgo and provide visibility into where you spend your money.
2. Evaluate savings goals.
Did you know 40% of Americans don’t have enough savings to cover a $400 emergency?[1] Saving consistently is vital to your financial health. If you created savings goals in 2021, check to see if you achieved them, and celebrate those wins! If you didn’t meet them, ask yourself why. Was it due to overspending? Were your goals unrealistic? Did you simply forget to put money away? Recognize where you fell short so you can learn and improve.
Next, create new savings goals for the coming year and beyond. Building an emergency fund should be your first priority. Experts suggest having three to six months of income saved up. Beyond that, start saving for other life goals, like a down payment, vacation, or college tuition. Determine the amount you need and calculate how much you can set aside each month until you reach your goal. Then, use online banking tools to automate those savings.
3. Assess your debt.
Is your debt getting out of control? Start by looking at revolving accounts like credit cards. The average credit card balance is $5,525, and the majority of people carry a balance each month instead of paying in full, which is a dangerous practice. [2] Credit card debt can wreak havoc on your finances if you do not address it. If you’re able to, pay off your balance in full. Otherwise, choose a repayment strategy, such as paying off bills with the highest interest rate first or using the snowball method to pay off the smallest balance first. You can also look into consolidating debt through a mortgage refinance or personal loan.
4. Request your credit report.
Your creditworthiness is a critical factor in assessing your financial health. That’s why it’s so important to view your credit report at least once a year to make sure it’s accurate. It also helps protect you against identity theft. If you notice accounts you didn’t open, report them at indentifytheft.gov. and if you spot credit reporting errors, ask the credit reporting agency to correct them. You’re entitled to one free credit report each year, which you can request from annualcreditreport.com.
Pro Tip: Use a special day of the year as a reminder to pull your credit report, such as your birthday or anniversary.
5. Review your mortgage.
When you bought your house, you chose the best mortgage and terms that were right for you at that time. But the market may have changed a lot since then, along with your financial situation. Perhaps you could benefit from a lower monthly payment, or you want to reduce your loan term and save on interest. Maybe you’re eligible to eliminate mortgage insurance or want to find out how much equity you’ve built up. Reviewing your loan can help you identify financial opportunities that you may not have known existed, so talk to your Loan Officer about setting up a quick mortgage consultation. If you’re planning to buy a new home, your Loan Officer can walk you through the homebuying process, help you determine your budget, and outline your best financing option before you start home-shopping.
Taking some time to review your finances and set goals puts you in the driver’s seat of your financial future. Check back in a few months to ensure you’re on track, and as your wants and needs change, adjust your strategy accordingly.
For more information call Crown Mortgage Company today at 708-857-1897.
Sources:
[1] Federal Reserve, Report on the Economic Well-Being of U.S. Households in 2018 – May 2018
[2] Experian, State of Credit 2021