The earliest parts of the year are also a good time to
“spruce up”
your financial life, particularly if you feel like you can’t get ahead or don’t have financial goals on your road map.
How can you clean up your finances? Pretty much any step you take to save more, spend less or plan for the future can leave you better off next year than you are now. That said, the experts we interviewed suggested strategies like poring over your bank statements, rolling over old retirement accounts, getting a handle on your debts and checking your credit reports to get yourself in the best possible shape.
Here’s a rundown of ways you can improve your financial life.
Assess your spending habits
If you’re chasing financial freedom but can never seem to get ahead, now is as good a time as any to look at your average spending to see if you can make some cuts. Financial planner Kurt Heineman, says he recommends starting with the purchases you have made over the last few months by pulling out your bank statements and credit card bills and reviewing your spending.
As you review all your regular purchases, see if there are any subscriptions you no longer need or even have duplicates of.
“This is a simple way to reduce your spending by potentially hundreds a month,” says Heineman.
Other spending habits that could need the ax (or at least some trimming) include money spent on dining out or entertainment, frequent online shopping or even hobbies that add up quickly in cost without you realizing it. Either way, you won’t know how much you’re really spending each month unless you check, so that’s where you’ll want to start. Then, look at where you can make some cuts.
Get the hang of budgeting
If you really want to clean up your spending, you can dive into the world of budgeting and start giving each rand you earn a
“job.”
This advice comes from Jesse Mecham, who is the founder of the money management app YNAB. Mecham says that, instead of using your bank account balance to dictate your spending habits, you should create a plan for how you’ll spend every rand you earn.
“This will encourage you to be a more conscious spender and empower you to stretch your money further,” he says.
Automate and beef up your savings
While using a budget can help you organize your income and spending in a way that makes sense, financial planner Ksenia Yudina of UNest adds that you may get even further ahead financially if you automate your savings each month and set financial goals.
“This is a great time to look ahead and determine your short-term and long-term financial goals like buying a new house, saving for vacation, getting a new car or remodeling your existing home,” says Yudina. “Once you figure out your goals, you can start monthly contributions into your savings or investment account to make sure you achieve them.”
Fortunately, many major online banks let you set up automatic transfers to savings that take place on a given day of the month. In the meantime, it is a good time to look at your emergency financial reserves to see if they’re enough for your needs. Mecham says that, between the pandemic, inflation and a potential recession, having an emergency fund is increasingly important.
“Protect your future self from these uncertainties by prioritizing any extra rands you have for your emergency fund,” he says.
Create a plan for your debt
Interest rates have been inching higher for more than a year, which is yet another reason you should take stock of your debt levels and look for a solution. If you have credit card debt is high, taking a few simple steps can help you save money, pay down debt faster or both. Financial planner Jordan Taylor of Core Planning says high interest credit card debt can easily cost you two to three times the amount you originally borrowed, and that consolidating debt could get you a lower interest rate, a better monthly payment or all of the above. Using a personal loan to consolidate debt can help you secure a fixed interest rate and fixed monthly payment.
Check your credit reports for errors
Your credit score is a crucial component of your credit health, and your credit reports are the one place you can spot potential problems (or even errors) early on. That’s why Sam Weisfeld, managing editor at FinImpact, says it’s crucial to check your credit reports for errors at least a few times per year. Doing so can help you find errors that may be hurting your score through no fault of your own, or even some of the earliest signs of identity theft. And don’t worry, it doesn’t hurt your credit score when you check your credit.
Bottom line
It is never to late to refresh your finances. The steps outlined here can help you get a head start, and that’s true whether you’re new to personal finance or you always have your head in a finance book.
Don’t wait another year to get your money organized, and your future self will thank you.
Adapted From: CNN
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