Written by Carissa Abazia
It’s New Year’s Day, so it’s time for hanging at home in PJs, football, champagne hangovers — and resolutions! It’s hard to believe we are in the year 2018. I always take some time on the 1st of January to reflect on my resolutions from the previous year and come up with some goals for the year ahead. And since I know I’m not alone, this year I wanted to share four resolutions that I believe will help you feel more financially secure in 2018 and beyond:
1. Stick to a budget. Should people make an ongoing habit of tracking everything they spend and save? I believe so. Create your own personal P&L (profit and loss statement) to keep track of the money you’re making each month and where the money is going. This will help to ensure you’re not spending money that you don’t have.
2. Pay yourself first. Paying yourself first means saving before you do anything else. Set aside a certain portion of your income the day you get paid before you spend any discretionary or “fun” money. Most people I talk to wait and only save what’s left over—that’s paying yourself last and not the habit you want to develop. If the government raises taxes, you will have to pay more taxes. Treat this the same way. Get in the routine of putting aside that money. Make it mandatory to pay yourself first.
3. Contribute to a retirement plan. This is similar to #2. You need to invest in your future and that starts with a retirement plan. Young adults should take advantage of employer-sponsored retirement plans (e.g. 401K). An upfront benefit of these qualified retirement plans is that your employer has the option to match what you invest, up to a certain amount. Other tax-advantaged retirement savings accounts include the IRA and Roth IRA. It’s never too late to start—consult with your local financial advisor or lender today, and start planning your retirement planning goals now.
4. Pay off credit card debt. Credit card debt is the number one obstacle to getting ahead financially. First, you have to find a way to make sure you’re spending less than you make each pay period while also setting aside an amount each month to build up that emergency fund (#1 and #2). This might require temporarily taking a break from dining out or not spending money on getting your nails done. In short, you have to stop abusing (and perhaps stop using) credit cards in order to pay them off. No way around it.
Your credit score will matter when you’re trying to borrow money for your new home. When working on a debt pay-off plan, the primary number you should be focused on is the total balance of your debt (and making it go down), which will naturally improve your credit score. Carrying a balance on your credit card is not required to boost your score. It’s the ratio of your balance to the limit and the timeliness of your payments that matter.
Use credit, but use it wisely.
From a personal perspective, my resolution is to plan more activities that bring me joy. Whether that means hiking a few times a month, taking time to read a book or listen to a motivational podcast, or trying out a new recipe, I am going to make sure I take the time to do the things I love most.
Wishing you all a healthy, happy and prosperous New Year!
Thanks for reading!
Carissa Abazia
@CarissaMortgage