Let’s rewind and think about the financial resolutions you made in January 2019. Reassess those goals and figure out if you hit your marks, or if your financial restraint (or lack thereof) left something to be desired.
Did you achieve your financial goals? Are you at the place where you wanted to be financially, or has 2019 been just another total fiscal washout for you? According to this report from U.S News, 80% of New Years’ resolutions fail by the 2nd week of February, financial or otherwise.
Everyone aims to achieve financial freedom, but not many know where to start. If you’re wanting to achieve financial freedom in 2020, here are five tips to follow:
1. Pay off your debt.
Debt is a difficult and emotional situation 80% of Americans face (Source: Dave Ramsey); it’s almost a national epidemic. According to the latest numbers from the Federal Reserve, American household debt has reached a record of $13.54 trillion (Source: Federal Reserve Bank Of New York). Thinking about debt can be overwhelming; however, you can start by making a list of all of your liabilities and prioritize them by the annual interest rate. Plan to pay the debts with the highest interest rates first (usually your credit cards). It does you no good to funnel money toward investments when you are paying 19% or more in interest per year...for each card.
If you hold a certificate of deposit (CD), any cash holdings, or savings bonds, it makes sense to sell those and pay off your highest interest debt. For example: If you pay 19% interest per annum for the $5,000 you owe on your credit card, you end up paying $950 per year in interest alone. Simultaneously, you make 4% interest on the $5,000 certificate of deposit you own at a bank, and you earn $200 a year as interest on the deposit. If you sell off the certificate of deposit to pay your credit card debt, you will end up saving $750 a year.
If you’d like more information on how to further reduce your debt in 2020, check out our blog “How to Pay Off Debt.”
2. Build your credit score.
If you’re looking to finance a large purchase anytime in the future, you need to make sure your credit score is in tip-top shape. Generally, the higher your credit score, the lower your interest rate will be, which will save you money. It is ideal to have a score of 800 or more, yet currently, only 20.4% of Americans can claim that status.
One tactic to rebuild your credit (and raise your credit score) is to take out a personal loan, which you are free to use as you see fit. Sound counterintuitive? It’s simple. You can utilize a personal loan to build up positive payment history, which accounts for 35 percent of your FICO score. By repaying the personal loan on time, it shows that you can handle debt responsibly. Consider setting up automatic payments, so there are no missed or failed payments, which can both be detrimental to your credit score.
For more information on personal loans and how they can help build or strengthen your credit, we have you covered here.
3. Have an emergency fund.
We all are vulnerable to unforeseen circumstances that life throws at us. With no preparation or planning, your budget could fall apart should you have an unexpected life event, such as sudden unemployment, a medical or dental emergency, or home repairs.
An emergency fund will safeguard you from unexpected expenses, without breaking the bank. Ideally, your emergency fund should be equivalent to 2 months’ worth of your expenses. It may take a while to establish, but it is important to have an emergency fund in place in case life throws you a curveball.
4. Collect your change.
The next time you go to a grocery store and your purchase total comes to $43.67, pay $50 in cash and pocket the change. When you go home, put the money in a large container (an empty water jug or any other container that you can find is fine). Think of it as your piggy bank.
Make this a habit, and don’t touch the money in the container for one year. You’ll be amazed to see that you will have saved a few hundred dollars over the course of the year. Use a small part of this money to treat yourself for the consistency you maintained. Then, with the balance, either pay off your debt, plan a vacation, or invest the money in a CD or other interest-bearing account.
5. Review your investment strategy.
If you have an investment strategy already, you’re on the right track. Whether you are saving for retirement to reduce taxable income, to start a business, or simply want your money to grow, you should have some sort of investment strategy.
In addition to your existing investment portfolio, consider a 401(k), 403(b), or an IRA to invest in your retirement.
We hope that these tips will help you create your achievable 2020 financial resolutions. Creating a resolution will get you started; however, you need to be disciplined and stick to your goals through the year. It may feel hard at times, but it will surely pay off, and you will see your credit score grow throughout 2020.
Consider kickstarting your efforts toward financial greatness in 2020 with a personal loan from LoanMe. For more information on how a personal loan from LoanMe can help you consolidate debt and get you back on track, contact one of our experts with all of your questions. Repayment options can be tailored to fit just about any budget, and your funds could be available in a matter of hours. Take back control of your finances in 2020!