While many people make a new year’s resolution to get physically fit, this is also a great time to look at becoming more financially fit. Joining a gym is a common thing to do in a new year, but that’s only the start. The gym won’t work out for you. You have to show up, do the exercises and lift the weights. Same goes with becoming more financially fit. Hiring an advisor is a great step. But you still have to do the “heavy lifting”. And this means making more financially sound decisions. If your financial health is not where you want it to be, consider the six tips below to improve your financial fitness.
1. Trim the Fat
One of the first steps toward a healthy financial future is creating a budget and spending less. If you take a hard look at your budget, odds are you can find some excess that you can easily trim without feeling the pinch. Discretionary expenses such as dining out, shopping, and entertainment are good places to start to examine.
2. Tone Up Your Debt
For many, the holidays have increased credit card balances. Don't let that debt get larger than it needs to with accruing interest. Start with your highest interest rate card and set a larger payment in your budget to begin lessening that total. Once it is paid off, use that same payment to start tackling your next high-interest card and so on.
3. Whip Your Credit Into Shape
Your credit score can affect many aspects of your financial life. Whether you are looking to buy a house, a car, or to take out a loan to start a business, your credit score will be used to determine how much interest you will pay and how likely you are to even get your funds. Unfortunately, many people neglect their score until they need it, and at that point, it can be difficult to improve in enough time. Keep your credit card balance far from the limits, be sure to make payments on time, and monitor your score for negative marks.
4. Build a Cash Reserve
Once you have trimmed the fat off your budget, you will want to put some of that into savings. One thing to start saving for immediately is an emergency fund. Surprise repairs, medical bills, and layoffs can damage your financial health if you are not prepared for them. Having this fund available for these times can lessen the blow and help you stay on top of your bills, so you don't fall behind.
5. Put Retirement Savings in Your Routine
Saving for retirement is critical. Many people do not save enough for their retirement or wait so long that it stresses their budget to meet this goals. Make it a point this year to focus on your retirement goals and to increase savings in order to help reach this goal. You should also find out if your company matches your retirement plan contributions. If there is a match, try to take full advantage by saving the needed amount.
6. Start a New Investing Routine
Investing is the quickest way to grow your wealth, but many people are afraid to enter the world of investing because they are afraid of losing money. Others are under the misconception that you have to invest a lot of money when the truth is you can begin your investment journey with as little as $100. Just like working out, it’s okay to start small. This way you are developing the habit to save. Then, when cash flow improves you already have the habit developed. As you have more money to invest consider meeting with a financial advisor.
Get financially healthy this year, set attainable goals to help you grow your wealth and get started on a secure financial future.