As we begin the new year, it is important to review your finances to plan for your future. Here are some tips for starting the new year off on better footing:
1. Budgeting
Take the opportunity to create a budget for your spending. Set monthly limits for expenses and consider following the 50-20-30 budget rule which recommends: 50% of your income should be spent on essentials, 20% should be saved and the remaining 30% allocated to discretionary, non-essential purchases.
2. Debt Control
With the new year, reevaluate how much you plan to pay for your personal loans and debts, and credit card payments. Try to keep your load manageable based on what you can realistically afford and match repayment terms to your time horizons. It may be possible to refinance debt if your credit score is good.
3. Understanding Your Credit Score
Take advantage of your entitlement to three free credit reports each year and spend some time reviewing them. Take steps to understand what your credit score means for your loans and finances, focusing on reversing any negative aspects. Furthermore, consider optimizing your credit card usage by finding the right credit card for you.
4. How to Start Investing
After creating a financial budget, think about investing. Some tips to follow are having a targeted asset allocation, asset class diversification, and synchronization of long-term goals, risk tolerance, and time frame. And don’t let comparison overwhelm you, select a portfolio to best meet your goals.
5. Retirement Savings
Reset your budget for your retirement vehicle so you can contribute a set amount each month towards your retirement savings. Remember, plan to only save amounts that you can realistically afford to avoid incurring additional debt. As a tip, incorporate your retirement savings into your regular budget.
Investing involves risk, including loss of value. Asset allocation and diversification cannot assure a profit or protect against loss in a down market.
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