Three Financial Moves to Make at the Start of the Year
Three Financial Moves to Make at the Start of the Year
By Nate Matherson, Co-Founder & CEO of LendEDU
Nate is the Co-Founder and CEO of LendEDU. He successfully built his own company, from startup to profitability, and has helped millions of consumers learn about and compare financial products, including student loans, personal loans, credit cards, insurance products, banking products, and more. Safely Deposit is delighted to feature Nate as a guest author. LendEDU helps you make confident decisions. This post is not sponsored.
2020 could finally be the year that you get your finances in order. With three simple moves, you can end 2020 on a much stronger financial footing than you had at the start of the year. Feeling good about your money situation is the best gift you can give to yourself as you start a new year. Yes, your financial health is possibly even more important than your workout schedule.
Move #1: Get Organized, and Create a Plan for Paying Off Debt
Getting your financial life organized is the first step. For some people, that's going to be a scary step. It can be frightening to realize you've been turning a blind eye to your financial health.
But getting organized is one of the biggest hurdles between you and the financial life you've always wanted. That means, in the upcoming year, it's time to get organized. Get all your bills together, and for many of us that means tallying up how much debt you owe. If it's a lot, try not to stress out about it. The important thing isn't how you've handled money in the past – it's how you're going to handle it from here on out.
Once you have your debt figure in hand, you should start by looking for ways to chip away at that debt. Come up with a plan that will have you debt-free or at least saddled with less debt by the end of 2020. If you start the year with $30,000 in debt, for example, and manage to decrease that amount to $20,000 by the end of the year, you'll still feel good about your progress, even if that debt isn't completely erased.
So, remember, even when you feel as if you aren't making progress quickly enough, those baby steps are still going to add up in the long run.
Some of the ways you can decrease your debt include:
Discounts, budget cuts: Maybe it's time to get rid of cable television in favor of something less expensive. You can also shop around on insurance packages and potentially save money. In my budget, I was able to save about $50 in this last year by reworking my renter's insurance policy.
Making more: It might be time to ask you boss for a raise or considering taking on a side gig. In the past, I've worked several freelance writing jobs and often made more than $100 per article.
Lowering your interest rates: You may want to call your credit card company and ask for a lower rate, or you could refinance your credit card with a personal loan. Your payments can be lowered, but you'll be paying extra toward your principal balance if you keep paying as much as you were before. Personally, LendEDU helped me compare refinancing companies and I was able to lower the interest rate on my student loans from above 9% to below 4%.
Selling stuff: Do you have a lot of possessions you don't use anymore or a collection you wouldn't mind parting with? Try to sell it. You may not get top dollar for it, but it's not doing you any good anyway tucked away in your closet. It will feel good to have your storage space freed up and a chunk of money to put toward your debt. In the past, I've used eBay and Craigslist with success.
Move #2: Organize Your Important Financial Documents
Getting all your financial documents together and stored in one place can help you to better shore up your finances. You'll be able to spot any shortcomings in your plan or avoid misplacing an essential document if you have a foolproof storage method.
You might want to check out Safely Deposit, a storage method that lets you upload digital and physical files such as tax returns, birth certificates, passports, and financial records. Remember that time that it took you 5 hours to find your 2014 tax return? OK, maybe that is just me, but I am sure that you can relate. As a bonus, you can also share these documents with your partner or anyone else.
Having all your documents stored in one easy-to-access location can make your life less stressful. It is as simple as that. Future you will thank you.
Move #3: Triple Check Your Beneficiaries on Important Financial Accounts
According to the Insurance Information Institute, a beneficiary is a person you want to benefit from an account of yours in case something unfortunate happens to you. While that's understandably unpleasant to think about, it's something you need to address for all your outstanding financial accounts. And, even if you've already listed beneficiaries for your accounts, you need to revisit them occasionally.
It's easy to overlook updating our beneficiaries on crucial things such as 401ks and life insurance policies. Every year, you should get in the habit of checking the beneficiary on all your accounts, even the ones you think are updated. Circumstances frequently change – you could have gotten married or divorced, or you may have become a parent and now need to implement your children in your financial plans.
It only takes a few minutes to check the beneficiaries for each account, and you should never be forgetful about such an important detail. Make a list of every account you may have a beneficiary for, including bank accounts, life insurance policies, annuities, pensions, and any other account you may have.
If you have to update an old beneficiary on one of your accounts, do it right away. It is quick and easy to do but can have a significant impact on the future of your wealth distribution if you avoid it, and the worst happens.
Having a clear and updated beneficiary can help prevent any fights about what happens to your money after you're gone.
Pencil in a Day and Get It Done
In just one day, you can complete all three of these tasks and ensure the upcoming year will be a great one financially. It won't take long to do, and it won't be hard, but you'll feel much more motivated and organized when it's done.