If you have New Year’s resolutions to save more money for retirement or emergencies, or to pay down some of that credit card debt, check out some of these simple financial tips.
Building a budget
When it comes to any type of financial planning, keeping a budget that works for you is crucial for the proper management of your money, regardless of your individual situation.
“Budgeting is vital, because it gives you a roadmap of how you want to allocate your money,” said Brian Brown, a financial wellness expert with GreenPath Financial Wellness’s Manchester office.
You should always budget regardless of your income level, according to Brown, because it gives you opportunities for how you might want to change or refine it.
“If you make $100,000 a year and are spending $150,000, then you’re no better off than somebody who’s making $30,000 and spending $80,000,” he said. “That’s why you should always look at what your safety net has been with your spending. … In addition to that, the arrival of a new job or any other sort of additional income can also help to refine your budget, and it helps you to make that plan and to make some informed decisions as far as paying down debt.”
But Brown added that a common thing people can forget about budgeting is remembering to put money away for an unexpected financial emergency or crisis.
“Not everyone always thinks in the full scale about what budgeting their money should include,” he said. “They may think about it as a budget to pay for all of their utilities and monthly expenses, but they don’t always think about budgeting for savings.”
Brown recommends working toward having about three to six months’ worth of living expenses tucked away as an emergency cushion — and budgeting helps to realize what that amount is for you.
“You’re obviously not going to develop those savings overnight, so it’s important to set goals until you get to where you want to be,” he said.
Give yourself credit
Knowing your credit score and what impacts it is also very important. Brown said a great online tool is annualcreditreport.com, where you can fill out a form to obtain a credit report for free.
“Before you develop a plan to help improve your credit and your credit score, you need to know what’s impacting it,” he said. “The first step to any sort of improvement is finding out what is on that credit report. … On-time payments are obviously vital, but so is keeping a balance of around 30 percent, because not only does that sometimes impact your credit score, but it’s also something that can impact your month-to-month financial situation.”
Your payment history is a large component of your overall credit score, Brown said.
“On-time payments are certainly going to help, because you’re showing the credit that you do have,” he said, “but on the flip side, you’re utilizing that credit with each of the transactions you’re making on your credit card.”
Ready for retirement
Getting into a habit of saving early and saving often, even if it is only a small amount each month, could make a world of a difference when it comes to retirement.
“A lot of people will assume they are too young, they are too poor, or they have too much debt they need to pay off first, but it’s never too late to start planning,” said Caitlin Demet, an independent advisor with Northeast Planning Associates in Bedford.
Demet said it could be very helpful to develop a trusting working relationship with an advisor, or to consult with family members or friends if you don’t already have one. Funding an emergency account in the long term also helps you avoid dipping into retirement accounts in the event of a financial crisis.
“If you can put even as little as $50 a month into a 401(k) or a Roth IRA, it compounds interest, so it will grow like you would never imagine,” she said.
Save on insurance
If you are trying to find the health or dental insurance plan that is best suited for you, Demet said a common thing most people don’t realize is that there is no cost for hiring an independent insurance broker.
“You can go to a broker and they will go out and help you shop for plans … and determine what is most important for you,” she said. “They might compare different plans in terms of identifying one that might be cheaper but will have a higher deductible. … It’s helpful to get some advice and to just have the options that make the most sense.”