Believe it or not, 2020 is right around the corner — and with every new year comes a chance to take stock of things in your life and see how they can be improved. Your financial health is no exception.
Whether you’re planning on exploring the real estate market in the new year or you’ve lived in your home for a while and you plan to stay put, these tips will try to help you bring more clarity to your financial situation. Read them over and then schedule a meeting with your financial advisor to determine what may work for you. They know your unique situation the best and are qualified to provide you with sound financial guidance.
1. Create (or update) your budget plan
Like most other things in life, taking charge of your finances starts with making a plan. Whether you’re starting from scratch or you already have one in place, every new year requires a new budget. Put simply, creating a budget plan encourages you to really look at where your money is going and to become more purposeful about your spending.
There are many handy tools available online to help you with this process, but the key is to put your money where it will have the biggest impact. In addition to making sure that your living expenses are covered, do your best to allocate a portion of your funds towards savings and to leave part of your income to discretionary spending, also known as “the fun stuff”.
2. Get serious about tackling debt
If you’re currently carrying a lot of debt, your financial advisor will possibly tell you that resolving it should be a top priority. Whether it’s from student loans, credit card balances, or medical debt, the interest you’re paying each month adds up and takes away income that you could be putting toward other areas of your budget.
To get serious about paying off your debt, the first thing to do is pick a debt strategy. There are several different methods out there, but two popular types are the avalanche method and the snowball method. With the avalanche method, you’ll make the minimum payments on all your debts and then put any remaining income toward paying off the debt with the highest interest rate. With the debt snowball method, you pay off your smallest debts first in order to get them out of the way before moving on to bigger ones.
Whichever method you choose, it’s important to pick one and stick to it. Using a dedicated strategy will help you create a clear path toward paying off your debts and it will also help you keep track of any progress you make along the way.
3. Work on your credit score
Even if you don’t have a lot of credit card debt to contend with, odds are you may still benefit from improving your credit score. The truth is that having an excellent credit score will usually give you access to the best interest rates on everything from mortgages to car loans, which will save you money long-term.
Before you get started on improving your score, it’s important to take a look at your credit report to see where you stand. You’re entitled to one free credit report per year from each of the three credit bureaus. Take the time to look them over carefully and report any errors that you find.
Next, work on raising your score. Some easy ways to boost your score include: making sure to pay your bills on time each month, paying as far above the minimum balance as possible, keeping your current credit card balances low, and avoiding opening up new accounts whenever possible.
4. Set some savings goals
Everyone knows that they should save money, but without concrete goals to aim toward, it can be all too easy to let that slide. Start 2020 off right by setting a few savings goals for yourself. With those goals in mind, putting money aside will start to feel like you’ve met a milestone, rather than feeling obligatory, which might make you more likely to continue the habit in the future.
Keep in mind that your goals can be big or small. For example, you may want to save toward a down payment on a new house or simply for a quick weekend away. In fact, if possible, it’s best to try and set a mix of both short and long-term goals.
Whatever your goals may be, you need to have two numbers in mind in order to reach them: the total amount you plan to save for the goal and the amount that you’re aiming to put toward that savings goal each month.
If you’re considering buying a home in 2020, get in touch with Embrace Home Loans. We’ll figure out if you pre-qualify for a mortgage loan and then help you find the right type of mortgage for your individual situation.