To finish the year in a better fiscal position, get started now
Personal Finance Writer
Covers tech, fraud, and credit card protection stories.
“Pay off credit card debt,” “Save
up an emergency fund,” “Stick to a budget” – these are all common New Year’s
resolutions for Americans hoping to smarten up with their finances.
But these financial goals are
very broad, which could set you up for failure. Personal finance experts say you
need to create specific,
realistic and measureable resolutions.
CreditCards.com asked representatives
from major banks, credit counseling agencies, national financial organizations,
along with other experts, to name one thing they recommend you do this year to improve
your financial outlook.
1. Tackle your debt strategically.
Making a dent in debt or even erasing debts altogether, is a popular New Year’s goal, says Dan Matysik, vice president of personal loans at Discover.
Be strategic in how you pay off your debts – specifically, determine how much you can commit to repaying and where you’re funneling these payments.
“When you are looking at your budget in the new year, one of the things you may be evaluating is how much you can put toward paying off debt,” Matysik says.
“If you have high-interest debt across different products, it may be beneficial to consider debt consolidation options,” he adds, by consolidating all your debts into one lump sum with a lower interest rate, such as a personal loan. “That way, you can have one monthly payment and potentially a lower interest rate and payment, costing you less in the long run.”
2. Automate your finances.
Many New Year’s resolutions
are tricky to keep, says Brian Ford, SunTrust Financial well-being executive.
The nice thing about financial resolutions, he says, is that you can automate
some of the heavy lifting.
“If I could completely
automate my exercise and eating routines, I’m confident I would be a lot
healthier than I am,” he says.
“With money, you can. From saving for
travel or your next big purchase, tracking expenses, paying bills and even
investing for retirement, you can set it and forget it.”
Set aside an hour or two and
automate your bills or transfers to savings, Ford says.
3. Don’t give up using credit entirely.
You may be tempted to stash away
your credit cards to spend less, but doing so may come with penalties, says Rod
Griffin, director of public education at Experian.
“Make sure you use your
credit periodically,” Griffin says. “Just a small purchase you pay off in full
every month or two is enough. Credit scores require an account to have a minimum
of three months of recent activity to be included in the calculation, and often
as much as six months.”
“If you don’t use your
credit, it might not be there when you need it most,” he says.
4. Create an emergency fund.
As you’re making your 2018
budget, figure out how much you can sock away weekly, bi-monthly or monthly,
and funnel that money directly into a savings account, says Katie Bossler, a
certified credit counselor at Green Path Debt Solutions.
“Put a set amount – say $20
or $25 a week – into an emergency reserves fund,” Bossler says. “Then you’ll
have some funds on hand to pay for that window repair or broken water heater.
And you’ll keep the expense off your credit card.”
5. Embrace technology from digital wallets to
If you haven’t already, this
may be the year to get up to speed with payment tools, such as digital wallets or
mobile banking apps, says Ben Colvin, North America SVP of enterprise security
“Safe and convenient mobile
shopping is at your fingertips with digital wallets like Masterpass, Apple Pay
or Samsung Pay,” he says. “This technology masks your card number for added
security and simplifies the checkout process.”
Digital payments can be used
online, within apps and in stores.
Embrace biometrics, too. That’s one way banks and card issuers are aiming to abolish the password.
“Fingerprints and facial
recognition are the newest and safest ways to prove your identity in mobile
payments, as you are the only person who can access your device,” says Colvin. “If
you’re using alphanumeric passwords, make them complex with a mix of upper- and
lower-case letters, numbers and symbols.”
Finally, try using apps to
help you manage your finances. You’ll find apps to check balances, budget,
set savings goals and make real-time payments, he says.
6. Ask for a lower interest rate.
If you’re chipping away at debt, a high interest rate may be setting you back. See if you can get a lower rate to ease the debt repayment process, says Bruce McClary, spokesman for the National Foundation for Credit Counseling.
“Credit cards are among the costliest forms of debt, so look for lower interest rates, either by negotiating with your current credit card issuer or shopping around for more competitive balance transfer offers,” McClary says.
This move could save you hundreds of dollars.
“You will want to know your credit score beforehand to know your chances of qualifying for the best offers,” McClary says. Look at your other debts as well, not just credit cards.
7. Commit to paying more than the minimum payment.
If you’re making only the
minimum payment on your credit card statement, you could be in for a long
journey to being debt-free. Speed up the process as much as you can, says Alice
Rodriguez, head of community and business development at Chase.
Pay more than the minimum – maybe
even double the amount owed – every month, she says. “The faster you can pay
down that debt, the faster you can allocate that money to your savings.”
8. Familiarize yourself with the retentions
If you have cable, internet,
phone or other services, now is the time to call your providers for a deal,
says Joe Ridout, manager of consumer services at Consumer Action, a nonprofit advocacy
group dedicated to consumer affairs.
“Your first year may be at a
promotional rate, while the second year is more expensive without any discounts,”
he says. “But if you’re a loyal customer and you’re out of a contract, you can
call and say you’ve received a flyer in the mail from a competitor or you’ve flagged
a better deal – you could end up with a price match or a substantial discount.”
This applies to insurance
rates, too. Annual surveys list average insurance payments and the disparity
could be as much as 300 percent for the same coverage, Ridout says.
“You need to be aware to see
if you can get competitors to undercut prices,” he says.
9. Use up, or sell, what you have.
After the holidays, you’ll want to curb splurging in the new year and maybe even bring in extra income, says Chris Henningsen, vice president of consumer awareness at InCharge Debt Solutions.
It’s an opportune time to use old gift cards, movie tickets and credit card points on groceries, gas, shopping, entertainment and travel.
If you have electronics, clothes or other goods that are worth reselling, “consider a garage sale, or offering items on a second-hand sales site,” Henningsen says. Pay off debts or pad savings with the proceeds.
10. Find a financial mentor.
Whether you want to make more
money, advance in your career or accomplish a new professional goal, you
likely need to shift some of your beliefs and behaviors, says Brad Klontz, a
certified financial planner, founder of the Financial Psychology Institute and
associate professor at Creighton University.
“Expand your financial
comfort zone by identifying someone who has either achieved what you want to
achieve or is significantly closer to doing so than you are, offer to take them
out to lunch and ask them about how they were able to achieve
these accomplishments, and what advice they might give to someone who wanted to
do the same,” Klontz says.
“Pay close attention to
beliefs and behaviors that differ from yours and examine how adopting them
yourself might help you better achieve your goals,” he says.
Bonus: Protect your identity.
2017 was an illustrious year
of data breaches and security threats. Sign up for identity theft alerts to
safeguard your personal information in case your credit cards, driver’s
license or health card numbers are stolen or compromised.
“Alerts will warn you if your
information appears on dark websites while resolution services aid in alerting
credit bureaus and filing police reports,” Colvin says. “Many services are
available to cardholders, free of charge, from card issuers or networks.”
See related: 9 ways to organize your finances in the new year, Hot, new rewards cards to debut in 2018
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