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Curated by Janice Myers, Senior Editor at BadCredify
The beginning of a new year is perfect for focusing on your financial well-being. Enhancing your financial literacy isn’t that hard — we at BadCredify.com have compiled the best tips to improve your financial health.
Aspects of Financial Wellness
Financial wellness isn’t just having money. True financial health means that you have managed to do well in every aspect and detail of your finances. From debts being paid down to pension savings funded and money spent wisely — enough to cover as you go. Financial well-being requires developing common-sense practices:
- Being ready for financial emergencies;
- Managing daily and monthly budgets;
- Establishing and achieving financial goals;
- Acquiring financial freedom.
Understand Where Your Money Flow
Good financial health starts with your money flow awareness. Are you financially prepared enough?
Find Out Where Your Money Comes From
Examine your past and current finances. What is your average income for the year? You need to analyze your expenses to get a clear financial picture.
Track Your Daily Spendings
What do you usually spend money on? Make a habit of writing down your expenses – you can use spending tracker apps – and you’ll be surprised how much money sometimes goes to completely unnecessary expenses. If they don’t match your budget, consider adjustments.
Spending money on daily coffee or frequent dining out might hinder your financial goals. You can save money by making small changes while occasionally enjoying your favorite treats.
Keep Your Financial Situation Safe
Create a structured system for your financial documents. Safeguard all receipts, medical bills, pay stubs, and student loan records. Don’t forget your tax records, as well as banking and insurance papers. You better have quick access to it in a legal matter or emergency.
Mark Your Bill Due Dates Visually
Struggling to balance your budget by month-end? It might be a timing issue between your income and expenses. You could use a clearer planning of your cash flow. Use a printed calendar to note the due dates of your bills. This way, you can frequently check it and plan your expenses for the coming weeks.
Audit Your Monthly Subscriptions
Take time each month to review your subscription services. Identify and cancel any that you’re not actively using or that don’t add value to your life, reducing unnecessary recurring expenses.
Small Steps, Big Changes
You don’t have to drastically change your financial lifestyle to get impressive results. Start small, one step at a time.
Stay Below 30% in Credit Card Utilization
Your credit usage is inextricably linked with your credit score. Using less than 30% is a solid strategy for keeping a healthy credit score. A strong credit score allows you to snag lower interest rates on loans, mortgages, and credit cards.
Don’t Use CC for Daily Purchases
Prioritize cash over credit cards for everyday expenses. It is easier to avoid overspending when you physically see money leaving your wallet. Yes, it’s not that convenient in the digital era, but it works.
Arrange New Due Dates for Bills to Enhance Cash Flow Management
If you experience financial tightness in specific weeks, it’s wise to contact your creditors and utility services. Adjusting your bill due dates to coincide with your paycheck can significantly ease financial management.
Keep Unexpected Financial Gains
It’s common to want to spend more after getting a raise, bonus, or tax refund. Yet, the smarter move for long-term financial wellness is to save or invest these gains. Start an emergency fund, allocate money towards a home purchase, or add it to your retirement funds.
Plan Your Meals
Efficiently save around a hundred dollars monthly by planning your meals. Stick to a grocery budget, opt for home-cooked meals over delivery, and avoid shopping for groceries when hungry to eliminate impulsive spending.
Save For Emergencies
Saving money is hard when you don’t see immediate results, but that’s not how saving works! Even small amounts of spare cash can make a great impact in the future. With a proper strategy, you can work towards saving more money and managing debts effectively.
Emergency Savings Provide Financial Security For A Rainy Day.
Securing your financial future starts with creating an emergency savings fund. Contribute a comfortable amount initially to handle potential emergencies, from car issues to healthcare costs, avoiding the risk of debt. Place a high emphasis on this specific savings account in your financial planning. As you gain more control over your finances, you may opt to save a larger amount.
It’s Okay To Use the Emergency Fund!
Setting specific criteria for when to dip into your emergency savings is important. Determine what counts as a real emergency. Don’t be afraid to use the funds when such a situation occurs. They’re meant for this reason. The key is to focus on refilling the fund subsequently.
Automate Your Savings
Here’s a golden rule in personal finance: “Always pay yourself first.” It’s not just some catchy phrase; it means you should squirrel away some money for savings and retirement before all else. Set up automatic deposits into a separate account and make regular monthly payments to make your future life easier.
Don’t Forget About Tax Refund
A tax refund often represents one of the biggest annual checks an American receives. It’s wise to strategize now about allocating part of that refund toward achieving major financial goals.
Insurance Is The Key
It’s smart to get personal property insurance. It helps avoid big financial hits, like replacing a car or personal items. If you crash a car, you still owe money on it and don’t have insurance, so you’re stuck with medical bills and car loans.
Reduce Your Debt
The hardest part of reducing your debts is to start doing so — but financial wellness is worth it!
Calculate Your Debts
Use any free debt log calculator to get a detailed overview of your debts. It usually includes the amount owed, interest rates, and anticipated payoff dates.
Choose A Debt Reduction Strategy
There are two common strategies to pay down your debts effectively:
- High-Interest First. Target the debt with the highest interest rate. Pay more towards this one while keeping up with minimum payments on your other debts.
- Snowball. Start with your smallest debt. Pay it off completely, then take what you were paying on that and put it towards the next smallest debt.
Change Shopping Habits
Take advantage of sales, use discount coupons, and consider bulk purchases for everyday items to save up more money. Consider switching to generic brands or shopping at discount stores.
Sell Unneeded Items
Take a good look around your home for items you no longer use. Online marketplaces or a traditional garage sale are great ways to sell some things. Not only does this declutter your home, but it also turns unused items into valuable resources for debt reduction.
Consider Debt Consolidation
Consolidating several high-interest loans into one with a lower interest rate can make things easier. You’ll end up with only one monthly payment.
Improve Your Money Habits
Develop healthy financial habits — and you’ll feel the difference in no time. Nothing motivates as much as realizing that working on yourself is paying off. Here are some tips to help make ends meet, and you can also develop the following habits.
Loans Are Emergency Tools!
It may be tempting to buy a new iPhone when you don’t have money. Rule number one: borrow money ONLY for emergency NEEDS. You should not use loans or credits on impulsive WANTS — it’s not conducive to financial well-being.
Watch Your Monthly Credit
Clear your credit card balances every month to avoid accumulating credit card debt. Set yourself a monthly expense limit for your credit card and commit to not exceeding it.
Check Your Credit Report Annually
You can monitor your credit report at annualcreditreport.com. Should you find any inaccuracies — fix them as soon as possible, and your credit score won’t be harmed.
Set Checking Account Balance Notifications
Most banks and credit unions allow you to set up notification alerts about your checking account balance. You can monitor your accounts either at the end of each week or when it falls below a certain amount.
Don’t Hold Your Healthcare Money Too Long
Should your insurance plan offer a flexible spending account — it typically comes with a use-it-or-lose-it rule. Any unused funds will likely be forfeited at year’s end. To fully utilize your benefits, ensure you complete all preventive medical exams and address any health needs before the year concludes.
Don’t Be Silent About Late Payment!
Should you find yourself unable to make a bill payment in time, act quickly. Reach out to your creditors immediately. Delayed bill payments can lead to various financial consequences.
Shop Around
Don’t limit yourself to the first found offer if you aim to save money. Comparing offers from at least three lenders can open your eyes to better deals. It’s fair for all types of credit — car loans, mortgages, or emergency loans.
Improve Your Financial Literacy
Educating yourself is the first step toward smarter financial decisions. Larry Snyder, Finance Expert at BadCredify, suggests starting by looking into the basics:
- How do I calculate interest rates?
- What are secured and unsecured loans?
- How does retirement planning work?
- How does compound interest add up?
- What are opportunity costs?
Not all information has to be presented ready-made. Be inquisitive, check different sources, and analyze.
Start Saving for Retirement
Planning for retirement shouldn’t be delayed. Automate your retirement savings to ensure consistent contributions, no matter how small; they have the potential to grow into a large sum over time. Make the most of your employer’s 401(k) plan and the added benefit of their contributions.
The pre-tax nature of 401(k) contributions is another boon, enhancing your saved amount. The best time to start securing your financial future is now, whether you’re just starting out or well into your career.
Aim For Success
Once you’ve got a clear view of your current financial situation, you should think about tomorrow. Setting goals helps you chart a course forward. With a well-thought-out plan, you have a guiding roadmap for the next chapters of your financial journey.
Open a 529 Plan
Though college may seem far away for your young children, planning ahead with a 529 savings plan can be invaluable. This investment account benefits from tax-free growth, making it an excellent way to build a college fund and lessen future student loan dependence.
Seek Your Financial Goals
Aspiring to buy a home or retire by a certain age is a commendable financial goal. Such specific objectives can greatly increase your likelihood of sticking to a budget. Create a list of your financial goals to help keep you focused. Adjust this list as needed, depending on how your financial situation shifts.
Save, Multiply, Educate Yourself!
Financial improvement is a continuous process. With a good understanding of your finances, you can now plan for life’s big events and upcoming large expenses. The ideal time to begin saving money is today!
