There are many ways you can make small changes to improve your financial health, whether you’re looking toward retirement or you just want to establish healthy money habits.
Yet, a recent Gallup poll found that only one-third of Americans (32 percent) maintain a household budget and only 30 percent of people residing in the U.S. have a long-term financial plan.
If you’re in this group, it’s time to take your finances seriously and set goals that will allow you to build a strong foundation. Use these five financial growth goals as inspiration as you look to strengthen your bank account in 2018.
Track Your Spending
An important part managing a monthly budget and building substantial savings is knowing where your money goes each month. If you’re not aware of what you spend, you may be surprised to find that you’re spending on items that you really don’t want—or that your daily coffee stop is actually adding up. College student Soha Rahimi stopped buying coffee every day and saved $1,277.50 in one year.
Start by finding an app you love. This makes it easy to track what you’re spending, both month-over-month and in real-time.
Prioritize Credit Card Debts
Paying off this debt is one of the top financial goals for many, and for good reason: the average household has an average of $8,000 in credit card debt. While having credit cards is important for establishing good credit, high balances can easily sneak up on you if you’re not closely monitoring your spending.
There are many ways to pay down your credit cards, one of which is to pay off one card at a time, starting with the one with the lowest balance. This gives you a sense of accomplishment, especially if you can pay it off quickly, which motivates you to keep going.
Alternatively, most financial experts will tell you to pay off your credit card with the highest interest first—which is only costing you more money with each day.
Be Smart About Savings
The two most important things to save for are:
- an emergency fund
An emergency fund is simply a savings account that you can tap into for unexpected expenses. You may have heard you should have three to six months worth of savings, but Suze Orman, a financial expert, feels otherwise: “What if you lose your job and can’t find another one for a year? What if you’re hit with an out-of-the-blue medical emergency? A million potential scenarios could drain your savings without warning, so it’s better to have at least 8 to 12 months; worth of living expenses squirrelled away,” Orman explains in a video for CNBC.
The second goal for savings is planning for retirement. If you’re still in your 20’s you may not be concerned with making sure you have money in your 60’s, but now is the time to make this a priority: “It’s easy to understand why retirement isn’t a priority in your 20s. You’re more concerned with kick-starting your career, not ending it in the distant future. However, being young gives you an edge if you want to build wealth for retirement. You have time to take advantage of compounding interest, so you can save a little now and reap big rewards
later,” says Leslie Haggin Geary, BankRate contributor.
Start by setting up a 401K with your employer, who can walk you through the process and don’t forget to ask if they contribute as well. This will follow you to every job you have, so it can accrue money for years to come; you just need to set up.
Check Your Credit Record
Credit scores have a far-reaching impact on our lives. Your credit score can affect the interest rate for loans, whether you get a mortgage, your ability to get a new credit card and much more. Every consumer is entitled to a copy of their credit report for free each year. Your goal for 2018 is to do exactly that.
There are three major reporting bureaus you can use: Equifax, TransUnion, and Experian. It’s important to check all three because they can each have different information. Once you have the report, check for no errors. Incorrect information is not only a potential indication of identity theft, but could hurt your credit. If you find an error, contact the reporting bureau to resolve it.
Next, check on the many factors that can have an impact on your score, including:
- The number of credit accounts you have open
- The dollar amount of available credit you have (more being better)
- How much of that available credit you are using
Use our blog post, Credit Score: What Really Does and Doesn’t Matter, as a guide while you read through your credit report.
Find New Income Streams
You may not be up for a raise, but it’s easier than ever to make extra money in the age of the Internet. Consider what you love doing—graphic design, writing, organizing your office space (really)—and then research how to turn that into a side gig.
For example, if you love organizing your office, you may be able to find a part-time virtual assistant job. Other non-online jobs include dog walking (more exercise!), tutoring, or even driving for a ride-sharing service.
Get Your Finances in Order
Make 2018 the year you start tracking your money, find a lucrative side gig, and save a large chunk of your emergency fund. You’ll end the year feeling successful—having created healthy money habits—and ready to make even better financial decisions.
Guest blog post by Jessica Thiefels.