Early in a new year is the perfect time to get your finances up to speed. Whether you’re starting from a mountain or a molehill, you can boost your family’s security and wealth by setting up and following healthy personal finance practices.
Build Strong Budget Habits
You have to start with the basics: how’s your budget game? A monthly budget tracks:
- Income from all sources
- Fixed expenses such as mortgage, rent, subscriptions, and loan payments
- Variable expenses such as groceries, credit card bills, and entertainment
- The ability to group expenses into categories
- The result each month of how your spending stacks up against your income
There are many recipes out there for budget habits and templates. Use the new year to make sure your budget is up to date and check out alternatives that can simplify your budget tracking, or get your first budget set up.
Track Your Progress
You can track assets and debts either as part of a robust budget system or within another sheet or app. What you want to see is a round up of all current:
- Assets:
- Bank account balances: checking, savings, money market, and certificates
- Investment and retirement account balances
- Debts:
- Fixed-sum loan balances
- Carryover balances of all credit cards and lines that aren’t paid off in full each month
- Interest rates:
- For each debt and asset account
Right-Size Your Accounts
Once you have a total picture of your assets and debts, it’s time to tweak how and where you manage them. Aim to:
- Park your savings into the highest-yield account types
- Put long-term savings into investment or time-locked certificates to earn more
- Consider a credit union with better returns if you’re using a commercial bank
- Consolidate funds that are split across accounts for no purpose
Slim Down Your Debt
You don’t have a magic wand that makes debt disappear, but you can still make significant progress this year on paying down outstanding balances.
The first step is to review current rates and consider whether you could save through a loan consolidation, home equity, or other type of loan to pay off high-interest credit cards and car loans.
Overall, aim to:
- Pay all mortgages and other secured loans in full and on time
- Stay on top of minimum payments to avoid fees and penalties
- Arrange your debt repayment to get rid of highest-interest accounts ASAP
- Get to where you can pay off credit cards in full every month (or stop using them)
Flex Your Income Muscles
Whether you’re a full-time employee, independent contractor, or the force behind a patchwork quilt of side-hustle, take a look at your current income and consider growth opportunities. Start by discovering how your income compares to the industry standard for your job in your location at the Bureau of Labor Statistics or Payscale.,
Next, consider options to increase your earnings. Can you:
- Make a plan and a pitch for a raise?
- Sell belongings you no longer need?
- Add a part-time consulting gig in your field?
- Shine up your resume or portfolio and apply for a new job?
- Write how-to guides, teach webinars, or otherwise share your expertise for profit?
Pump Up Your Savings
In the U.S., 47% of individuals say they aren’t prepared to handle a $400 emergency, and only 16% are on track to save enough for retirement.
Where are you with your savings? Experts recommend:
- Setting up automatic transfers and deposits to fund your savings
- An emergency fund covering six months’ salary (or start small and aim for $1,000)
- A retirement fund that saves 12.5% (one hour per day) to 15% of your gross income,
- Dedicated accounts to save for specific goals: new house, vacations, education, etc.
Trim What You Don’t Use
Don’t pay for what you don’t need. Look at fixed expenses particularly to see if you can save by:
- Reducing subscriptions: streaming, audiobooks, magazines, etc.
- Dropping your trash service to a smaller size container
- Cutting ongoing utility or appliance warranties that don’t pay off
Check Out the Right Credit Union
Partnering with the right not-for-profit credit union puts your needs front and center, unlike commercial banks that are responsible to their investors. If you’re in northern New Jersey, your financial improvement plan starts by joining the best credit union in NJ.
North Jersey Federal Credit Union (NJFCU) offers convenient ATMs, affordable loan and credit card rates, and low fees. Since 1936, we’ve helped our members meet their savings, credit, and budget goals, and we’re ready to help you meet yours.
Ready to improve your financial game this year? Become an NJFCU member today.
Sources:
Bureau of Labor Statistics. Occupational Employment and Wage Statistics. https://www.bls.gov/oes/
Payscale. Discover your earning potential. https://www.payscale.com/for-individuals/
EveryIncome. About EveryIncome. https://everyincome.com/about/
EveryIncome. How’s your financial health? Our 10-point checklist will give you an idea. https://library.everyincome.com/plan/hows-your-financial-health-our-10-point-checklist-will-give-you-an-idea/
Investopedia. What Percentage of Your Salary Should Go Toward Retirement? https://www.investopedia.com/articles/personal-finance/092414/retirement-what-percentage-salary-save.asp