For many people, their New Year’s resolution involves losing weight or quitting smoking. But the new year is a great time to start thinking about how you are going to become more financially sensible this year.
A good place to start is to take a look at your credit card habits. Are you using your credit cards only for convenience sake or for emergencies? Or are you using them like an open-ended loan, racking up debt and interest charges? Regardless you can find great interest rates and deals when using comparison sites like www.comparethemarket.com/credit-cards/.
The best way to use a credit card is to pay off the balance every month and carry a balance on the card only when you need to use it for for a large, necessary charge that you can’t otherwise afford, such as expensive repairs to your car, or for things that require a credit card, such as rental car or hotel reservations. This not only keeps you out of debt and saves you money, but it also improves your credit score, which can save you money in the long run with lower interest rates and other advantages.
How much are you spending?
Another thing to look at on the way to improving your finances is your overall spending. Are you spending way more than you need to? For example do you buy coffee every morning or eat out for lunch and dinner several times a week? Brew your own coffee at home and take your lunch to work every day and you could easily come up with a couple thousand dollars that you could save, invest for retirement or use to pay down debt.
While discretionary spending is a logical place to look for savings, you might be able to save money on some of your necessities as well. For example, if you combine your homeowners and automobile insurance, you could save a few dollars a month. Bundling your TV, Internet and phone services can also save you money. Another place to look for savings is your mortgage if you have one. Interest rates are at historical lows, so if you are in a position to refinance your mortgage, you could save several thousand dollars a year.
Improving your finances doesn’t have to be all about cutting expenses. Make sure you are getting the best rate possible on any savings account you have and consider putting some of the money in a CD if you don’t need it any time soon. Also, make sure you are contributing the minimum amount to your 401k plan to get any company match offered. And do anything you can to reduce taxes. Utilize flexible spending accounts or health savings accounts, and contribute to an IRA or college savings plan for your kids if you can afford to.
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