3 Tips For Having A Financially Fruitful New Year
New year, new you. And new ways to make the most of your finances! The year 2020 is off to a great start for Americans, as they enjoy a booming economy with record job growth, a thriving stock market, rising household incomes, and more.
How good is the current economy, you may ask? Federal government data shows that the current U.S. economic expansion is the longest in U.S history, beating out the previous record that lasted from 1991 to 2001. That means it’s the perfect time to get ahead of your finances! Here are three great ways to make the most of your money, and make 2020 your most financially fruitful year to date.
Limit credit card interest
It may be tempting to make the minimum payments on your cards when you’re feeling low on cash, but this may end up working against you. Neal Stern, CPA and member of the AICPA Financial Literacy Commission, suggests creating a plan to curb high interest rate credit card balances. That means sharpening your budget and setting aside a designated amount each month before balances get too high.
“Pick the strategy that works best for you,” Stern says. “Pay off the small balances first to build momentum or set your sights on balances with the highest rates to magnify your interest-reduction power. You’ll see the impact compound over the year as the amount you owe decreases and you keep more of your earnings, allowing you to pick up the pace toward a debt-free future.”
Get a free debt analysis
Believe it or not, there are tons of nonprofit credit counseling agencies out there who will provide you with a free debt analysis. That means sitting down with you personally and helping you figure out a budget, as well as tactics for decreasing your debt.
Does a free debt analysis sound too good to be true? Many other Americans think so too, which is why it’s a lesser known path to financial health. However, not all agencies are created equal. To find a good credit counselor, Howard Dvorkin of Debt.com recommends a few prerequisites:
- Search the Better Business Bureau and ensure that the agency has an A+ rating
- Ensure that the agency has been in business for at least a decade
- Check online reviews to be sure that clients are happy, just like you would for a nail salon or car dealership
Be sure to have an emergency fund
Life is unpredictable, and it’s nearly guaranteed that you’ll have to deal with a few unforeseen expenses, such as car repairs or replacing a stolen item. There’s a reason that having an emergency fund is listed on just about every “how to be financially responsible” list you’ll come across (including this one).
As per the name, you should only withdraw from this fund in the case of a true emergency. That means medical expenses or necessary bills, not a new car or vacation. How much money you should keep in an emergency fund depends on your lifestyle, but there are a few starting points to consider.
If you’re new to saving, start with an initial goal of $1,000. From there, you can grow the fund by setting aside an amount of your paycheck each month to put in a savings account, until you’ve reached the recommended six months worth of living expenses. Saving is one of the best things you can do for your financial health, and it’s crucial to have a solid emergency fund to avoid stress and debt.
While the economy is booming and America’s financial future is looking bright, your personal alignment with this outlook is in your hands, and your hands alone. You must take the time to evaluate personal financial goals, such as the ideal amount to keep in savings, or the age you wish to retire. Start with the three basic aforementioned tips, and you’ll already be well on your way to financial freedom.