by Michael J. Swanson
There’s no time like a new year to take a fresh step toward earning real financial freedom. Like so many Americans, you may be living with credit card debt or feeling discouraged about saving for college or retirement. No one is immune. There are many challenges to balancing life’s budget.
Sometimes it feels so overwhelming that it’s hard to know where to start—or start over. To help you navigate a rocky financial landscape, here are a few tips to point you and your loved ones in the right direction.
Maximize your credit score.
We’re all judged by how we’ve handled money in the past. A strong personal credit score helps you qualify for a car loan, buy a house, leverage credit cards and so much more. However, even if you have a low score that dates back to when you first started earning and learning about financial responsibility, it’s not too late to raise it. For example, you can dispute errors on online reports like Equifax; negotiate the erasure of old debt that went to collections; apply for a traditional or secured credit card to boost good credit; and, very importantly, pay your bills on time. Over a third of your credit score is based on a history of paying.
Focus on cash savings.
As hard as it may seem, stashing away a little more money each month to build an emergency cash savings fund of at least six months’ worth of living expenses should be a high priority for anyone seeking true financial freedom. Unexpected expenses are just a part of life: a family member gets laid off. The car needs a huge repair. The reason you need a large chunk of liquidity is so you don’t have to tap an alternative resource that will cost you more in the long run. A credit card will charge a huge finance fee to borrow—no one wants to take out another loan—and retirement funds are intentionally tied up for a future, not present, emergency.
Pay off your credit cards every month.
As you probably know, having a couple of credit cards is actually good for your credit—if you use your plastic responsibly. The first rule of thumb is to pay it off religiously. If you can’t, this is a huge sign that something is off. Another key is not charging everything to a credit card, even if you want those flight points. You are demonstrating a sound financial practice if you try to keep charges around 30 percent of your credit limit. Maxing your credit card—even if you can pay it off each month—will not help improve your score.
Work with a professional financial advisor.
Everyone can benefit from talking to an advisor, but especially if you’re not a numbers person by nature. A qualified consultant who considers credit scores all day long can help you uncover new places to save and unexpected ways to live smarter financially.
Create a budget.
Simply sitting down and looking at your finances, including long-term savings, could be a helpful wakeup call. Review your annual credit card statement to see where expenses are out of control and write down realistic, step-by-step goals for the new year. Putting a plan in writing is the first step in working toward financial freedom.
Visit the Consumer Financial Protection Bureau online at www.ConsumerFinance.gov for additional information that will help you reach your financial goals in 2018 and beyond!