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Financial Education

Eight Steps to Take Now to Put Your Finances on the Path to Success All Year Long

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Editor’s note: Quorum is not affiliated with any of the companies mentioned in this article and derives no benefit from these businesses for placement in this article.

While a lot may have seemed out of your control in 2020, there’s one sure way to take back some control in the new year: getting your finances in shape.

Below are eight steps to a brighter financial future. Some only take a few minutes; others require a bit more time. But with the right attention, they can all help put you on the path to financial success in 2021 and beyond.

1. Take Stock of What You’ve Got.

Over time, you accumulate. You open a new account here, take out a loan there, and before you know it, you’ve lost track of your big picture. Start this year by creating a financial inventory: a list of all you own and owe that includes the following:

  • Bank accounts: checking, savings and CDs
  • Investments: brokerage, 401(k), IRA and annuity accounts and real estate
  • Insurance: life, disability and other policies that benefit you
  • Credit: mortgages; lines of credit; credit cards and other revolving debt; auto, student and personal loans

Note the current balance of each account or policy, along with the company that holds it, the account number and contact information. Store your inventory in a secure location that’s password-protected if it’s a digital file.

Now that you’ve documented the big picture view of your finances, you can make more informed financial decisions going forward. Your inventory also boosts your estate planning and disaster recovery stance as neither you nor anyone else will have to search for this information in a crisis.

2. Budget Your Year.

A big obstacle to financial freedom for many is living above your means. A budget can help you curb lifestyle creep by documenting your monthly income, identifying where it needs to be spent (housing, groceries, utilities, etc.), proactively deciding how much you want to save and prioritizing which nonessential expenses make the cut.

Creating a budget is easier than ever with digital tools that help you stay on track (a few popular ones—and free—are Mint, EveryDollar and Wally). Each budgeting app works differently, so be sure to explore the options to find the right one for you.

If apps aren’t your thing, you can use an old-fashioned spreadsheet budget created in either Excel or Google Sheets.

3. Save for a Rainy Day (and More).

With your budget in place, it’s time to decide what to do with the money you plan to save each month. Your financial inventory (see step 1) may help to show you where it’s needed. For instance, if you don’t have three to six months’ worth of expenses set aside in a savings account in case of emergency, start building a rainy-day savings fund.

Next, do your retirement accounts need more attention? Take a look at your 401(k) contribution and determine if you’d like to increase it at the next available opportunity.

Still have some money available in your savings bucket? Set aside what you can for the things you’d like this year:

  • Family vacation
  • Cash for birthdays and holidays
  • Whatever is on your wish list

If self-discipline is an issue, set up automatic transfers into your savings account or consider opening up multiple goal-specific savings accounts.

Don’t forget to make a plan to tackle any debt.

4. Plan to Pay Down Debt.

If you’re concerned about the total amount of your credit card balances after completing your financial inventory, make a plan to pay them down this year.  You might have to make some tough decisions to achieve this goal such as cutting back more on non-essentials or picking up a side hustle. But that’s the point of having a big picture view of your finances: It helps you prioritize financial well-being.

Two popular ways to tackle credit card debt focus on one card first, while paying the minimum on all others. Each method repeats the process until every card is paid off:

  • Snowball method: You pay off the smallest balance first, keeping you motivated by the quick win.
  • Avalanche method: You pay off the highest interest rate first, saving you more money.

Understanding what motivates you can help you choose between the snowball and avalanche methods.

5. (…and 6 and 7) Three Quick Hits.

You’re on a roll, so don’t quit now. These three steps are quick and easy:

  • Check your credit report: You’re working hard to secure your financial position. Don’t let someone else wreck it. Routinely check your credit report for errors and fraudulent activity, both of which can damage your credit history. You’re entitled to one free credit report per year from each of the major credit bureaus. Check one now and space the other two throughout the year.
  • Prep for tax day: Start a 2020 tax file and gather into it receipts and other information you’ll need to file your return. Add W-2s, 1099s and any other filing forms as soon as they’re available.
  • Set up automatic bill pay: Avoid paying late fees, save on stamps and gain back some time each month by automating payments for recurring bills.

8. Schedule Quarterly Financial Checks.

One last thing to do: Make it a point to monitor your financial situation throughout the year and adjust as needed. Go ahead and block some “check-in” time on your schedule for the end of each quarter to make sure you stay on track.

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CUNA 2023 diamond award trophy icon

CUNA 2023 Diamond Award Winner

Financial Education

Quorum derives no benefit from businesses in return for placement in this blog.

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