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5 Important Financial Resolutions for 2019

| January 09, 2019
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The new year brings new opportunities for a fresh start, and many people have hopes of changing habits in their life in the upcoming year. Intentionally addressing your finances during the new year can allow you more freedom to live with purpose and to do the things you want to do in your life. These small financial changes can make a big difference in helping you carry out your new year's resolution.

  1. Pay Down Your Debt

The most important financial thing you can do in the new year is to pay down your debt, especially if you have credit card debt, which tends to come with a high interest rate. Remember that every dollar you spend on interest is a dollar you are not able to invest for your or your children's future.

This year, take a close look at your accounts with balances, which might include credit cards, personal loans, auto loans, home equity borrowing, or maybe even student or parent loans. Note which ones charge the highest interest rates. If you work at paying off the debt with the highest interest rate first, you will see the most financial benefit. However, I recommend building positive momentum by paying off the account with the lowest balance first so you feel you’re winning the game early.

 Increasing the amount of the payment you make every month is the best way to pay off your debt quickly. For example, if you have a credit card with a $2,000 balance and 18% interest rate, you could choose to increase your monthly payment from the minimum $35 to $100. This would allow you to pay off the debt about eight years sooner and save thousands on interest.

  1. Increase Your Savings

While paying down your debt, you should also take steps toward increasing the amount of money you are saving. There are three key areas where you need to get on track with your savings if you are not already there. For each area, set your personal goal of how much you want to save, set a timeline for how quickly you want to accomplish it, and make your savings automatic to help you achieve your goal.

Build an emergency fund that has 3 to 6 months of essential expenses in a liquid account. This provides a cushion in case you suffer a job loss or other financial setback.

Contribute to your retirement account to get your savings on track. If your company matches contributions, you should be contributing enough to get the full match so you do not miss out on this potential for immediate growth to your account. The IRS recently came out with changes to contributions for retirement plans for 2019. The contribution limits have increased for 401(k), 403 (b), IRA, and most 457 plans.1

Save for your kids' college education. Tuition rates are growing each year, so the sooner you start saving, the better. Section 529 college savings plans and Coverdell Education Savings Accounts both offer appealing tax advantages.

  1. Develop and Use a Budget

Everyone talks about using a budget, but the challenging part is actually developing a realistic budget. You need to know how much you typically spend to help you be realistic about future plans. This year, start by cataloging how much you spend in each category of purchases for two months. You can record purchases as you make them or use your monthly bank and credit card statements as your detailed log of spending.

Once you know how much you typically spend, review the total for each category and decide how much you plan to spend in that category each month. Take into account whether you need those items or just want them, and ensure that your spending and saving add up to no more than your monthly income. Once you have your spending plan, set up a simple spread sheet to track your actual spending and ensure you stay within your budget.

Budgeting can be also useful when preparing for retirement. Knowing how much you typically spend in certain categories can help you calculate how much you'll need to save for retirement. It also can help you stay on track with spending when you're in retirement. No one wants to run out of money while in retirement.

  1. Review Your Credit Report

Lenders are tightening borrower restrictions every year, and the worse your credit score is, the higher your interest rates will be on new debt. You need to have a handle on your credit report to know what lenders are seeing and make sure it is accurate.

You are entitled to one free credit report per year from each of the three credit bureaus. Use AnnualCreditReport.com to access the free credit reports, and look over each one to ensure they are accurate. If you find any errors, file a dispute with the credit bureau that provided the report to get the mistakes corrected.

  1. Protect Your Identity

It's becoming increasingly important to protect yourself from identity theft and the financial mess it can trigger. This year, be especially diligent. Review your monthly statements to look for suspicious activity, and shred paper statements instead of putting them directly in your trash or recycling. It's even more secure to get statements delivered online so you don't have to worry about paper statements falling into the wrong hands. In addition, protect your social security number and do not carry your social security card in your wallet.

Reap Financial Benefits in the New Year

The new year provides a clean slate to address any areas that you may have had on the back burner last year, including your finances. Evaluate your financial big picture planning and focus on areas where you may be weak. Through all of it, remember that money is a tool that you can use to live with purpose, and as you get your finances in order, you will be able to use your money to truly build wealth and work toward financial independence.

On behalf of all of us here at 360 Financial, Happy New Year!

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

Prior to investing in a 529 Plan, investors should consider whether the investor's or designated beneficiary's home state offers ant state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

1https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19000-for-2019-ira-limit-increases-to-6000

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