The new year has arrived, and with it comes the opportunity to make a few resolutions that will improve your financial well-being. Consider these six tips to make 2012 a fiscal success.
Outline Your Financial Goals
The first step toward achieving your financial goals is to define them. What do you want to change or accomplish this year and in the future? What is your reasoning behind this change? How will achieving this goal positively affect your life? When you’ve identified specific goals, write them on a piece of paper, and post the list somewhere it can be seen as a regular reminder. This daily reminder will help you hold yourself accountable. Create an outline for accomplishing these goals, complete with a timeline and a manageable step-by-step process. Make your goals less daunting by dividing them into easily-attainable segments. These mini-milestones will increase the likelihood that you achieve your long-term goals.
Check & Improve Your Credit Score
Determining your credit score begins with checking your credit report. Once a year, you can request a free copy of your credit report. Look it over thoroughly, checking for any potential errors. Look closely to make sure there aren’t any inaccurate late payment reports, and that the balance on each account is accurate. If you do find an error, it’s important to contact the credit reporting agency as well as the organization or merchant in question, as both are responsible for correcting inaccuracies. If you’ve been negligent with bills or if you’ve left balances unpaid, your credit score will be low. Unfortunately, there is no quick fix for a less-than-stellar credit score. Repairing and rebuilding your credit score is a bit like getting in shape: It’s a process that requires time and dedication. Start by going through your bills and setting up payment reminders. This will prevent future late payments, and start you on the right track to rebuilding your credit score.
Pay Off Bad Debt
Make it your goal to pay off credit card debt with the highest interest rate first by increasing your monthly payments or even by making extra payments. After one debt is paid off, apply the same process to the debt with the second highest interest rate, and so forth. This action also could help improve your credit score.
Although it’s a bit morbid to discuss your own death, it is important to be prepared. Create a will if you don’t have one, or spend a few minutes reviewing your existing will to make sure it’s up to date. It is also important to establish a power of attorney for financial matters, a durable power of attorney for health care issues, and an advance health care directive, also known as a living will. There are software programs and digital templates that can guide you through the majority of estate planning fundamentals, but it’s always a good idea to have an estate planning attorney review your documents to ensure that everything is in place.
Making sure you have sufficient insurance is vital to decreasing financial fear. If you’re a homeowner, make sure your homeowner’s insurance covers any and all potential needs. For instance, if you live in a coastal area — or a region that sees substantial rain — make sure your policy includes flood insurance. On an individual level, make sure you have adequate disability insurance. Assess your life insurance policy to confirm that it will adequately cover your dependents or beneficiaries. Like so many of these financial resolutions, taking stock of your insurance coverage is a preventative measure that can give you peace of mind and provide financial security in worst-case scenarios.
Create an Emergency Fund
Expect the unexpected and create an emergency fund. Putting a little bit of money aside each month can help prevent future debt by covering unforeseen expenses such as costly car repairs or a damaged roof. Work toward creating a savings equivalent to at least six months of living expenses. Establish this fund in an interest-bearing account, such as a savings account, money market account or CD.