A new year is always a great time to turn over a new leaf, and if you haven't been responsible about money, now's the time to start! Wise Bread gives a couple of really great suggestions for savvy financial moves to make this year.
The New Year is upon us, and if you didn't reach all your financial goals in 2013, here's your opportunity to start fresh.
Maybe you're tired of being broke or feel that you haven't given your savings account much attention. You can't undo the past, but you can improve your future. Here are seven financial moves to make in 2014.
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1. Aim for a Three- to Six-Month Cash Reserve
If you barely have enough in your savings to cover living expenses for one or two weeks, you need to get serious about saving money.
No one is immune to a job layoff, and a pink slip can come out of nowhere. A three- to six-month cash reserve, in conjunction with any unemployment compensation, could be the thing that prevents financial ruin.
Start by always "paying yourself first" — putting money in savings before you can spend it. Then review your budget to see where you can cut back and save more.
2. Get Rid of High Interest Credit Cards
A credit card in your wallet is great for emergencies. But it doesn't do you much good if you're paying a crazy high interest rate. Take a look at your credit card statements. If you have good credit, yet you're paying more than a 13% rate, start shopping for a new card. With a high score you should easily qualify for a rate of 10% or lower, or perhaps a card with a 0% introductory rate.
3. Pay Down Debt
Nothing good comes from excessive credit card debt. Too much consumer debt lowers your credit score, and if you apply for a loan or credit card, a high credit utilization ratio can trigger a rejection.
Get serious about debt elimination and devise a plan to pay down your credit cards. Even if you can only increase your minimum payments by a small amount, something is better than nothing. Cut your cards in half to eliminate any spending temptation, and apply your disposable cash (after feeding your savings account) and bonus cash to debt.
4. Increase Your Retirement Contributions or Start Preparing for Retirement
If you're contributing to an employer-sponsored 401(k), look at your finances to see if you can increase your contributions. This can give your retirement savings a boost, especially if your employer matches contributions. And if you haven't begun retirement planning, make this your year to start. Participate in your employer's 401(k) plan or speak to a financial planner about starting an IRA.
5. Downsize If You're House Poor
If the majority of your income goes toward housing, and you don't have cash for savings and extras, accept reality and make plans to downsize in 2014.
Whether you're renting or buying, moving into a smaller, cheaper home can lift a huge burden from your shoulder and provide some wiggle room. And with the extra income you could pay down credit card debt or increase your cash reserves.
6. Identify Bad Spending Habits
Impulse shopping, buying things to keep up with others, and shopping without a list might explain why you have nothing in savings. If you want to take control of your money, you need to recognize where your money goes, and the spending habits that can leave you broke.
Go through your credit card and bank statements. How much did you spend on clothes, dining out, vacations, and electronics during the year? Additionally, determine what motivated these purchases. For example, do you spend when you're bored or upset? Or do you buy to uphold an image?
Understanding why you spend and changing your mindset can help you save in 2014.
7. Order Your Credit Report
Every consumer is entitled to one free credit report each year from AnnualCreditReport.com. If you didn't order your report last year, put this on your to-do list for 2014. Or better yet, order your report today. It only takes a few minutes to verify your identity and gain access to your reports.
Once your reports are viewable, check to ensure that all accounts are accurate and up-to-date. If you suspect identity theft, there is a link online to file a dispute.
— Mikey Rox
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