Consider these 10 financial resolutions for the new year
The first of the year brings both the promise of new beginnings and the burden of self-improvement. Fueled by the nostalgia of the holidays and armed with a year’s worth of regrets, some 45 percent of Americans decide to make New Year’s resolutions each January, according to research from the University of Scranton. They are, it seems, taken by the spirit that led Benjamin Franklin to advise, “Be always at war with your vices, at peace with your neighbors – and let each new year find you a better man.”
We all certainly have our fair share of vices, especially as they relate to money. So it’s unsurprising that financially themed promises for improvement tend to be among the most popular resolutions made each new year. However, the fact that only about 8 percent of resolution makers achieve their goals does not bode well for hopes of improved money management.
Neither historically low odds of success nor uncertainty about the best resolutions to make should discourage you from improving your financial habits, however. WalletHub’s editors have crafted the following “10 Best Financial Resolutions for 2017” list, along with some helpful pointers for bringing them to fruition.
The full report is available at wallethub.com.
1. Thoroughly review your credit report and sign up for credit monitoring
Thanks to the increased availability of free credit scores, most people have a good sense of their credit standing these days. Too few of us are familiar with the contents of our credit reports, however – perhaps because we assume our credit scores tell the full story. But such thinking is flawed. For starters, as many as one in four people have a credit report containing an error that could affect their credit score, according to research by the Federal Trade Commission. Furthermore, reviewing at least one of your major credit reports on a regular basis will enable you to spot signs of fraud before they get too serious.
2. Pay bills right after receiving your paycheck
Taking care of monthly obligations before allowing yourself to indulge in any luxury expenses is a helpful budgeting strategy, giving you a better sense of what you can truly afford and what you can’t. It also helps you avoid ever having a late payment reported to the major credit bureaus, which is one of the easiest ways to damage your credit score.
3. Repay 20 percent of your credit card debt
The combination of a 0 percent balance transfer credit card and a well-crafted payment plan can help folks with at least “fair” credit save hundreds on finance charges while getting out of debt months sooner than they would otherwise.
4. Use different credit cards for everyday purchases and another for debt
The “island approach” involves isolating unique financial needs on separate financial accounts, as if they are a chain of islands. The most basic application of this strategy is using a rewards credit card for everyday purchases that you can repay in full by the end of the month and a 0 percent annual percentage rate (APR) card for revolving debt.
5. Add one month’s pay to your emergency fund
Roughly 54 percent of Americans do not have a rainy day fund, according to the Financial Industry Regulatory Authority. Like someone without insurance, folks who lack an emergency fund are merely tempting fate and putting themselves at risk of financial catastrophe in the event of prolonged unemployment or significant emergency expenses.
6. Improve your credit score by 20 points
Less than 1 percent of people have perfect credit scores, which means nearly all of us have room for improvement. And 20 points is an amount by which pretty much everyone can improve their scores, regardless of the starting point.
7. Get an ‘A’ in WalletLiteracy quiz
Financial literacy levels in this country are far too low. In fact, only 57 percent of U.S. adults are financially literate, according to a 2016 survey by Standard & Poor’s. So start 2017 by taking our WalletLiteracy quiz and getting a baseline score at wallethub.com.
8. Focus on your physical health
There is a clear connection between physical, emotional and financial health. For starters, the average person spends about $4,342 on health care each year, which represents nearly 8 percent of total annual expenditures.
9. Make a realistic budget and stick to it
The fact that we’re on pace to rack up roughly $80 billion in new credit card debt during 2016 is perhaps a bit less surprising when you consider that only about 40 percent of adults have a budget, according to the National Foundation for Credit Counseling. But both statistics also signal the need for greater urgency on our part.
10. Look for a better job
Sometimes we get so caught up in spending less and saving more that we forget to address the other side of the equation: how much we actually earn. But the benefits of finding a better-paying job could actually end up outweighing all your other financial maneuvering put together.
Kiernan is senior writer and editor at Evolution Finance.
