For many, Jan. 1 represents a clean slate, and that means a chance to right the ship and develop new, healthier habits. If financial fitness is on the agenda for 2017, these 10 financial resolutions from WalletHub can help.
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, but too few of us are familiar with the contents of our credit reports. 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. With that being said, no one can keep tabs on their credit around the clock; that’s where credit monitoring comes in. Signing up for free credit monitoring will enable you to receive an instant notification anytime there is an important change to your credit report.
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.
The best way to ensure success is to set up automatic monthly payments from a deposit account. This will add discipline to the process without you having to think about it.
Repay 20 percent of your credit card debt
Considering that the average household with credit card debt will owe approximately $8,400 by the end of 2016, it will be difficult to reach debt freedom in one fell swoop. So we recommend starting smaller, by making a plan to transfer and pay off 20 percent of what you owe over the course of 2017. That would amount to about $1,680 for the average household, requiring monthly payments of $140 with a card offering 0 percent on transfers for at least 12 months. If you can afford higher payments, make them. The sooner you pay off what you owe, the better off your wallet will be.
Use different credit cards for everyday purchases and 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 APR card for revolving debt.
Doing so enables you to get the best possible terms on each card rather than settling for average terms on a single card. It will also help you reduce the cost of your debt, considering everyday purchases won’t be inflating your average daily balance.
Add one month’s pay to your emergency fund
Building up some monetary reserves should be one of the first orders of business for any financial makeover. While we recommend ultimately building a fund with about 12 to 18 months’ take-home income, we recommend starting with the goal of adding a month’s income to your savings over the next year. This will help protect you from incurring more debt if hit with a minor emergency expense. And once you’ve adjusted to this new component of your budget, you can gradually start socking away more and more.
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. Furthermore, credit-score improvement in turn has the potential to save us quite a lot of money, on everything from loans and lines of credit to insurance premiums and apartment rentals.
Get an ‘A’ in financial literacy
Only 57 percent of U.S. adults are financially literate, according to a 2016 survey by Standard & Poor’s. Start 2017 by taking WalletHub’s WalletLiteracy Quiz and getting a baseline score. Then, throughout the year, study the areas where you struggled and periodically re-test yourself to gauge your progress.
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 his or her total annual expenditures. Money is also our biggest sources of stress, according to the American Psychological Association. And people who get regular exercise tend to have better credit scores. This underscores the importance of not only getting your financial house in order, but also exercising regularly and engaging in other healthy practices aimed at reducing health care costs. It won’t be easy, but this is one resolution that will certainly pay dividends in multiple areas of your life.