It’s the start of a new year—a time when most people make resolutions to accomplish personal goals. For some, that means taking a closer look at their financials. Here are four steps you can take to help get your finances on track this year.
- Pay bills on time
Paying your bills on time is an important financial practice—it builds your credit and prevents late payment fees, additional interest and utility shut-offs. Many financial institutions offer payment alerts or automatic payments to make on-time payments easier. You can also use a calendar to track all your monthly payments; just be sure to check it regularly.
- Reduce your debt
Begin by prioritizing your debt. Pay off outstanding balances on state and federal taxes, federal student loans, child support and/or alimony because these debts could cause your wages to be garnished, or a lien put on your property, without a court judgement against you. Next, use any leftover money in your budget to pay off your remaining debts, focusing on the ones with the highest interest rates. Once this debt is paid off, continue the process.
- Monitor your credit report and score
Regular monitoring of your credit report allows you to spot fraud quickly and correct errors that could impact your score. The best way to monitor your credit report is to go to annualcreditreport.com and download your free, annual credit report from each of the three credit-reporting agencies—Equifax, Experian and TransUnion. Consider getting one report every four months, which will help you monitor your credit throughout the year. Remember, your free credit report doesn’t include your credit score. That must be purchased separately.
- Use rewards card to maximum advantage
If you have great credit, you should consider a credit card that offers cash or cash-equivalent rewards for using it. Generally, these cards offer 1-2% cash back on your purchases. To maximize the benefits, use the card for all your purchases—big and small—and pay it off every month to avoid interest. There are also some specialty cards that provide cash back for specific types of purchases, such as restaurants and travel. Look for a card that pays more than 2% in one or two categories where you spend a lot of money.
Looking for more financial tips? Visit My Smart Money for more tools and best practices to help you make progress on your financial goals in the new year.