The beginning of a new year is the perfect time to improve your finances, even though it may sound like a dull task. For some, the idea of sorting out their finances isn’t very appealing, but it can help set yourself up for a solid financial future. It doesn’t have to be a difficult task to get your finances in order this year. Check out our 4 tips for getting your finances in order!
Develop a budget by compiling your expenses.
Instead of budgeting what you'd like to spend, use receipts to create a budget for what you actually spent over the last six months. One advantage of this approach is that it factors in unexpected expenses, such as car repairs, illnesses, etc., as well as predictable costs such as rent.
Reduce your debt as quickly as possible.
Generally speaking, lenders look for a total debt load of no more than 36 percent of income. Since this figure includes your mortgage, which typically ranges between 25 percent and 28 percent of income, you need to get the rest of installment debt (car loans, student loans, revolving balances on credit cards) down to between 8 percent and 10 percent of your total income.
Get a handle on expenses.
You probably know how much you spend on rent and utilities, but little expenses add up. Try writing down everything you spend for one month. Try renegotiating your cell phone plan or cut your cable bill and stick to a streaming service. You'll probably see some great ways to save each month
Establish a good credit history.
Order your credit report online and check your score to see how you measure up. If your credit score is over 720, you're doing really well. Any lower and you can use this new year to improve it!