The start of a fresh new year is the perfect time for you to get a headstart on getting your finances in order. Reforming your financial life might seem a little daunting, and even tedious, but if you take these simple yet strategic steps, it should be a cakewalk.
Know your real hourly rate
Your salary might be what determines how satisfied you are with your job, but when it comes to your financial planning, it is your real hourly rate that counts. From your total salary, you need to discount the taxes and then divide the remaining figure by the hours worked, to arrive at your hourly rate. This figure is what you should base your budget and spending plan on, to benefit the most.
Take stock of your debt
Paying off your debts might be a goal you’ve set for yourself, but the first step is to actually take stock of your debts and create a plan to pay them off. Otherwise, it is likely to just become one of those many failed resolutions. You need to list out all your debts with all the relevant details- the amount, current interest rates, and so on. With all the details laid out before you, it would be much easier for you to chalk out a strategy to pay off the debts, or at least reduce them drastically.
Pay more than the ‘minimum’
The term “minimum payment” often gives us a false sense of comfort. Paying the bare minimum when it comes to your credit card bills actually does more harm than good in the long run. It is advised that you pay a little more than the “minimum” on your credit card bill, even it is by a nominal amount, to avoid being a slave to interest.
Do an annual review
It is important to have an annual review of your finances. It need not entail a complete financial overhaul every time, but you might need to make slight tweaks in your financial planning that would be beneficial in the long run. This review should include going over your retirement savings, investment allocations, assessment of your annual budget and setting new financial goals. In case you are anticipating a major life event- marriage, having a baby, buying a new house, and so on, you could bring in a financial advisor to finetune your financial plan.
Set up alerts
Signing up for text or email notifications for your credit cards, student loans, and other financial accounts, can help you stay on top of your finances. Setting up alerts for your bank accounts can remind you to make payments that are due as well as let you know about recent transactions- thus reducing the chances of missed payments and overdraft fees.
Increase your retirement contribution
We are often bogged down by our past financial decisions and paying off debts, to plan adequately for the future. We often end up neglecting saving up for the long-term, especially when it comes to retirement. This is, however, the perfect time to start since time and compound interest are both on your side. Increasing how much you set aside as your retirement contribution can be a valuable aspect of your financial planning that is sure to pay off in the future.
Check your credit report and score
You must check your credit score regularly and ensure that your credit reports are free of errors. Kickstarting your financial planning by going through these reports is a good way to go about. Your credit score is very important since it represents what kind of a borrower you are, and it is important when taking out fresh loans and charting out the course of your financial plans.