The new year is an ideal time to start focusing on your financial security. You’ve made it through the holidays, and you have an entire year’s worth of spending and saving activity to look at when formulating budgets.
But first, you need to figure out what being financially secure means to you.
Start formulating goals for your finances; do you want to increase your savings? Or maybe you want to start a separate emergency fund to put your mind at ease. Perhaps you just want to better understand where your money goes. When you set a clear goal for yourself, it becomes easier to develop a strategy for success.
Just by implementing some of the following strategies, you can improve your finances and feel more secure by this time next year.
Surprise yourself with a year’s worth of savings during next year’s holidays.
Take steps to improve your credit
Do you have or will you be getting a car loan? A mortgage? Maybe you’re thinking of opening a new credit card? If so, look at your current interest rates—and then check your credit score. Typically, the lower your credit score, the higher the interest rates you’ll pay on any loan. That’s why improving your credit score can be a good way to save each year.
Credit scores are based on your credit history, past payments, balances carried, and other factors that all come together to tell a lender how reliable you’re likely to be to pay the money back. Each of these elements is weighted differently, which will help you figure out where to focus first:
- Payment history factors in all your on-time payments, late payments, skipped payments, and similar past issues—accounting for 35% of your credit score.
- Amount owed is the total of your debt balances carried over, and the ratio of this amount to your credit limits. It’s typically recommended that you use below 30% of your total limit. The amount of credit utilized accounts for 30% of your credit score.
- The length of time you’ve had your accounts lets lenders know you’re not new to borrowing; it counts for 15% of your credit score.
- New credit accounts recently opened makes up 10% of your credit score.
- The different types of credit you have, such as credit cards, auto loans, and mortgage debt, make up the remaining 10% of your credit score.
What steps can you take to start boosting your credit?
First, monitor your credit report. You are allowed a free annual report from each of the major three bureaus which helps you look for wrong charges, forgotten debts, errors in recorded payments and any other issues that may be negatively impacting your score. Be strategic by ordering your reports at different times of the year so that you are keeping an eye on things regularly. Report any errors by sending a certified letter to the bureau; you can use the sample provided by the Federal Trade Commission (FTC).
From there, start changing your budgeting and bill paying behavior. If you are paying a credit card balance late every month, then you are taking a massive hit on your credit report. Set up automatic bill pay whenever you can so that you don’t miss another payment. Then, address your total amount owed by looking at your balances compared to your limits, and find the number that gets you in that ideal 30% ratio.
The other factors count less towards your score and may be harder to change immediately. You can only establish credit history over time, so maintain your open accounts appropriately, and your number will keep going up. Don’t try and go out to open new lines of credit and don’t try and diversify your credit–this will happen over time.
Protect your credit
The last thing you need is fraudulent activity negatively impacting your credit. The Identity Theft Resource Center (ITRC) reports that as of December 20, 2017, over 174 million consumer records have been exposed during data breaches in the past year. Checking your credit reports annually will help you keep an eye out for any suspicious activity, but what else can you do to start protecting yourself from fraud?
- Put a freeze on your credit: If you’re not taking out any loans in the near future, freezing your credit means that no one can open a line of credit in your name without you being alerted. That means you can focus on restoring and improving credit, not falling prey to malicious activity. It will also prevent you from taking out store cards or other debts on a whim.
- Shred unwanted documents: If you receive paper statements from any accounts or if you store any of your receipts, shred them before throwing them away.
- Get social savvy: Think of some of the security questions that are often asked for account protection, like your mother’s maiden name, your first pet or the street you grew up on. Then think of the personal information often displayed on social profiles like birthdays, hometowns and even addresses. Hackers don’t need to work too hard when you willingly share with them all of the information they need.
Get a secured credit card
If building credit is important to you, consider getting a card like the Green Dot® Platinum Visa® Secured Credit Card. Your credit line will be equal to the amount of your security deposit—and the minimum amount to deposit is $200. As you make regular payments and stay responsible with your spending, your information gets reported to the credit bureaus, helping establish your credit history. As with any credit card, it’s important to thoroughly understand the fees and account structure, so be sure to check out Green Dot’s simple fees before applying.
Monitor your bank and account statements
The more often you look at your accounts, not only will you be able to look for erroneous activity, but you’ll also be keeping an eye on your spending—and splurging. If your bank balance drops over the course of one day because of an unnecessary purchase, you’ll be able to see what was splurged on, and it may help you practice restraint the next time around.
Use money management tools whenever offered. Many account providers offer a free mobile app that allows you to look at your balance and transaction history with just the tap of a button.
Reassess account fees
Simple fees that you’re not paying attention to can quickly add up. Are you always using an out-of-network ATM for your bank account withdrawals? It may be time to find a bank that has a more accessible network of ATMs, or one with lower charges. Many checking accounts have fees if you don’t meet minimum balances or certain activity levels, so make sure you’re not throwing away extra money by checking for other, cheaper account options.
It’s a good time to go over some of your financial habits from the past year, which can be a great guide going forward in 2018. Where do you want to improve, but also, where did you succeed? Prepare yourself for the rest of 2018 and get a Green Dot’s 5% Cash Back Visa Debit Card today. Monthly and other fees do apply, and you can see Green Dot’s simple fees here.