Considering a New Year’s Resolution? Healthier habits and weight loss are probably the most common, and the topic of a recent column. Others resolve to be kinder or more patient, perhaps less stressed — which are not unrelated.
In fact, money is our No. 1 stress factor, according to the American Psychological Association. It’s also one of few over which we can exercise some control, so financial resolutions make good sense, and cents. With that in mind, the financial Website WalletHub consulted leading finance and consumer psychology experts to create its 10 Financial Resolutions For 2018:
1. Monitor credit. With free annual credit reports, not knowing is no excuse. Yet few annually, or ever, review their own credit reports. I once found a $300 alleged “nonpayment” I didn’t owe. It took time and tenacity, but successfully disputing it raised my score.
Signing up for 24/7 credit monitoring (free or low cost from local and national providers) provides instant notification anytime there is a change to your credit report. Catching changes instantly can prevent problems and provide peace of mind.
2. Pay bills on payday. Meeting monthly obligations before indulging is the best budget strategy. It better indicates what you can truly afford, and prevents score-reducing late penalties. Some accounts reward consumers for consistent early payment.
3. Repay 20 percent in 2018. Americans now have a record-breaking, and disproportionate world share of, credit card debt, now exceeding $1 trillion. Obviously best practice is to only charge what can be immediately paid. Those with “good” credit can transfer old balances to a low-interest card offering a zero-interest/no fee balance transfer (read the fine print to see what’s charged later).
4. Use a separate card for everyday purchases. Using different accounts for everyday vs. long-term charges enables you to get the best possible terms. That way, everyday purchases to be paid off on paydays won’t inflate the bigger, interest-generating debt balance. And if you do incur interest on your everyday card, you’ll know you spent too much that month.
5. Increase the emergency fund. Most Americans don’t have a rainy-day fund, according to the Financial Industry Regulatory Authority. Layoffs and life emergencies can happen to anyone, so common advice is at least three months (six for older folks) of basic expenses saved and untouched. Wallethub recommends building up to a year’s worth.
6. Add 20 to your credit score. The average is 679, and fewer than 1 in 6 have “perfect” scores of 800 or above (max is 850). Higher scores mean lower interest rates, faster and higher qualifications for buying homes and cars, and in some cases, better employment. Maintain an open credit card account in good standing, and pay on time or early whenever possible.
7. Get an “A” in financial literacy. The U.S. ranks 14th globally for financial literacy in Standard & Poor’s survey, behind Canada, U.K., Singapore, and other major players. Nearly half of Americans grade their own financial literacy at “C” or below, according to the National Foundation for Credit Counseling. Don’t know where you stand? Wallethub and other consumer finance sites have wallet literacy quizzes; getting a baseline score then rechecking may help measure progress toward an “A” by 2019.
8. Eat well, exercise, don’t sweat the small stuff. Physical, emotional, and financial health are interrelated. According to the Bureau of Labor Statistics, the average person spends $4,612 on health care annually. People surveyed by WalletHub who got regular exercise had better credit scores. That’s two more reasons to have a healthy lifestyle.
9. Make, and stick with, a realistic budget. It’s amazing what a little planning can do to reduce financial stress. Only 40 percent of adults have a budget, according to the NFCC. Start simply by gathering three months of bills and listing all recurring expenses. Rank by importance, with true necessities such as housing, food, and health care at the top. Then simply cut from the bottom until your take-home exceeds planned spending. Finally, keep track in a diary year-round.
10. Consider job changes. If reducing expenses isn’t feasible or desirable, the only option is earning more. But the benefits of switching jobs may not outweigh staying put, such as when it necessitates a move. Compare costs of living; higher salaries can get eaten up by higher rents, insurance, transportation, etc. One alternative is more education; learning marketable skills can increase earning potential.
For more information see http://bit.ly/1MuQ5ab and Mymoney.gov.
Sholeh Patrick is a columnist for the Hagadone News Network. Contact her at Sholeh@cdapress.com.