A common New Year’s resolution is to save more money in the year ahead. While your exact goals may differ depending on your financial situation, looking at last year’s financial picture can help you stay on track and better manage
your spending habits in the year ahead.
The start of a new year is a good opportunity to look over your credit report
. Your credit history is extremely important to your financial health, and can influence whether you’re approved for a loan, or what interest rates you will qualify for.
Even if you are already aware of your credit score
, it is a good idea to review your credit report annually to be sure there are no errors. You can obtain a free copy
of your report once a year from all three major credit bureaus. Go through the report to ensure everything is accurate including your personal information, credit inquiries, and payment history. If you see anything wrong, you’ll need to correct it by contacting the credit bureau directly, and you may also need to report it
if you have reason to suspect that your identity may have been stolen
Look through your finances for last year, and pay attention to the following:
- Savings. How much money did you save, and did you meet any savings goals you had set? If money was tight, you should consider creating a formal monthly budget and eliminating some of your expenses this year.
- Debt Utilization. How much debt did you incur last year, and how much do you still owe? Consider whether you should aim to decrease your credit card usage this year. If you have debt, create a plan on how to effectively pay off as much as you can in the new year. You might consider paying off the credit card with the lowest balance first, or you might decide to pay off the credit card with the highest interest rate first. If you plan on getting rid of any of your credit cards, eliminate those with higher interest rates or ones that don’t offer benefits like cash back.
- Life Events that Impacted Finances. Note any changes in your life, such as the death of a loved one, births, marriages, retirement, and divorces, as these can have a huge impact on your finances. Did they cause your finances to be out of whack last year? Do you anticipate any such special circumstances affecting your finances this year? If so, plan ahead by saving more, or determining what you would do with extra funds if you expect a windfall.
While paying down debt
is important, so is saving for your goals such as home ownership
. It’s a good idea to evaluate all of your financial goals for the year and map out a budget
that will allow you to achieve them all.
Other Areas to Review
- Employee Benefits. If you haven’t maxed out your 401(k) or IRA, consider increasing your contributions - at least up to the amount that your employer will match. Don’t forget to review incentive plans, health spending accounts, corporate stock options, and other benefits that your job may offer as well. It’s also a good idea to review your beneficiaries annually to ensure that those listed still make the most sense.
- Investments. Check your bonds, stocks, and other assets. Will a reallocation of investments better benefit you in the year ahead? Contact a financial planner or investment advisor to talk through your options and goals.
- Insurance Policies. Review all of your insurance policies including your car insurance, homeowner’s insurance, health insurance and life insurance. Does your current coverage still match your needs? If not, contact your insurance provider to discuss some adjustments.
- Taxes. Don’t wait until the day before your taxes are due to prepare your returns and get necessary documents in order. Giving yourself ample time to file your taxes will help you to avoid potentially costly mistakes, and give you time to consult with a tax professional if necessary.
- Estate Plan. The start of the new year is also a great time to review your will and estate plan. Review the beneficiaries, guardians, and trustees named in your estate plan to ensure that no changes are necessary.
Going through your finances as you start the new year can help you stay organized and goal-oriented, and can allow you to plan accordingly to achieve your financial goals. For more tips on managing your finances, budgeting, and reaching your savings goals
, visit the BankFive blog