Pay down that old debt in the coming New Year!
The New Year holiday creates a feeling of starting fresh and encourages us to set new goals. While diets come to mind, setting new financial goals should be on the top of our lists. As you reflect on the past year, focus on your experiences – build on what worked and what didn’t to shape the new year’s money habits. Here are some ideas to consider as you set your financial goals for the New Year.
New Savings Account for the New Year
Think about what you want to save for the coming year and commit to opening a savings account to reach that goal. Examples can be creating an emergency fund or setting money aside for your children’s future college tuition. Decide on the type of savings account that will meet your goal and commit to depositing a set amount on a regularly to get into the habit of saving. For example, if you open a basic savings account, deposit $25 every month and sign up for direct deposit or automatic withdrawals from your checking account. Increase the amount once you are comfortable with saving.
Visit https://www.fdic.gov/consumers/consumer/news/september2018.pdf and https://www.investor.gov/introduction-investing/basics/save-invest for information about various savings accounts.
Pay Down Old Debt in the New Year
Confronting your debt and thinking about how to pay it off can be scary and overwhelming, but you should use the New Year to face your fears. First make a list of your debts, noting the monthly payment, current balance, and interest rate, and make a plan to start paying them down. Experts recommend focusing on either debt with the highest interest rates or debts with the lowest balances to pay off. You will likely save more money paying off debts with the highest interest rates but it may be faster to pay off the smallest balances first. Whichever method you choose, start by adding a small amount to one of your current payments.
Visit https://www.fdic.gov/consumers/consumer/news/cnfall17/debt.html and https://www.consumer.gov/debt#!what-to-know for additional information.
Keeping your finances organized will help you control your money and achieve your financial goals. Some basic tasks to help you start organizing include making a budget, tracking your spending, and putting a system in place to ensure you pay your bills on time every month. Monitor your credit card and bank statements for any unexpected fees or unusual activity. The easier you find mistakes or unauthorized transactions, the easier it is to correct them. As you organize your finances, start small by picking one organizational task and focus on that task for one month before adding another. For example, start by making sure your bills are paid on time by setting up automatic bill pay from your bank account.
For more information on managing your finances, explore our Financial Checkup at https://extension.umd.edu/finance.