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5 Top Personal Finance Tips to Start the New Year Off Right

Finance | 01/04/2022 23:00
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Do your resolutions include putting work into improving your finances? If you're resolving to give your financial situation a boost in 2022, you've come to the right place

The beginning of a new year means we are all gearing up for new possibilities, starting new habits, and creating new resolutions to make 2022 the best year yet. But for better or for worse, our finances don’t automatically reset when the clock strikes midnight. That’s why we’ve gathered up our top five personal finance tips so that you can start off your new year on the right foot. 

Here are our top five person finance tips for the new year.

Tip Number 1: Create a budget

If you’ve never had a budget (or never had one that you have stuck to), start 2022 off with a monthly budget. Creating a realistic budget that you can stick to is the best way to pay off debt or start saving. The best part is that budgeting is actually super easy! 

Step 1: Determine Your Fixed Expenses

Fixed expenses are your expenses that do not change from month to month. They occur every month with a predictable payment that is due. This can include your rent or mortgage, car payment, cable bill, trash collection, subscription services, internet, phone, child care, and student loans. Start a spreadsheet and enter everything under “Outgoing”.

Step 2: Determine Your Variable Expenses

Variable expenses are your expenses that do change from month to month for a variety of reasons. These expenses might include your groceries, electric bill, parking fees, dining out, entertainment, and home repairs. Look at your past credit card bills or receipts to figure out (approximately) how much you pay each month for each of these categories. Enter these expenses under “Outgoing” as well.

Step 3: Determine Your Income

This should be fairly easy. Log your take home income (post tax always; any refunds that you get should be treated like a bonus or found money; never count on money to come back into your hands once it leaves your paycheck). Add in any extra income you may have. This could include a side business, dividends, or rent that you collect. Enter these in your spreadsheet as “Incoming”.

Step 4: Compare the incoming and the outgoing

Add them up and compare. Are you bringing in more than you are spending? Fantastic! In that case, look to see where you can invest this extra money. Maybe you can use it to pay off your credit card or start building your emergency fund. Whatever your goal is, make sure to include this as a line item in your expense budget. By doing this, you no longer have “an extra $200 laying around” – instead you have “$200 that is going right into savings”. 

On the flipside, maybe you are spending more money than you are bringing in. If this is the case, look for places to cut your expenses. Are there subscription services you can cancel? Can you eat out twice a month instead of four times a month? Can you switch from brand name cereal to generic? Look for any and all places where you can sacrifice to make some changes. Little cuts here and there can add up to big savings in the long run.

Creating a budget is our number one tip for starting the new year off right. The most important thing is to be honest about your expenses and to keep track of your incoming and outgoing faithfully. 

Tip Number 2: Aim to Save

Saving more money is oftentimes a top resolution for people. Whether it’s to build a safety net, add to their retirement, or save up for a down payment, saving more money is a great goal for the new year. Creating a budget and adding in a savings line is a great first step. 

Look into opening a new savings account. Do some research about the different accounts out there and what fits your needs the best. Perhaps a simple savings account at your local bank will suffice, or maybe a money market account will give you a little more bang for your buck. If you want to tuck your money away where you won’t be tempted to touch it, a CD (certificate of deposit) account might be the best option. No matter what account you select, making a commitment to save more will pay off in the long run if you stick with it.

Tip Number 3: Commit to Increasing your Credit Score

Having a good credit score is vital for a number of reasons. Some of these top reasons include:

  • Lower interest rates on credit cards and loans

  • Better chance for credit card and loan approval

  • Higher credit limits

  • Better insurance rates

  • Easier approval for rentals

  • More negotiating power for loans and accounts

Having a good credit score quite simply makes you a more desirable candidate. Prioritizing a better score will open up more opportunities and can save you a good deal of money in the long run. 

To increase your credit score, focus on making full, on-time payments. This is one of the top ways to affect your score in a positive way. Avoid opening new lines of credit and try to pay down as much of your debt as you can (remember that budget we were talking about? Include this as part of your budget to ensure you pay down extra every month). Your credit history – do you make on time consistent payments? – and your credit utilization score – how much debt are you in compared to credit you have available to you? – are the two most important factors in your credit score. Focus on improving these and you can easily increase your credit score within the year.

There are five ranges of credit scores:

  • Exceptional: 800 to 850

  • Very good: 740 to 799

  • Good: 670 to 739

  • Fair: 580 to 669

  • Poor: 300 to 579

Depending on what your current score is, try to move to the next bracket in 2022. Aiming for a score of 700 or above will open you to a lot more financial opportunities.

Tip Number 4: Sign Up for a Credit Monitoring or Identity Theft Protection Product

Keeping an eye on your credit is hugely important in the world of finance. If someone gets a hold of your identity it can be an absolute nightmare to sort out. Signing up for credit monitoring or an identity theft protection plan is a great way to ensure you are never put into this position.

While most products out there have a monthly cost associated with them, there are a number of free monitoring products. Services such as Credit Karma and Capital One’s CreditWise offer free monitoring and will alert you to any unusual activity with your social security number. These services cannot protect you from identity theft, but the earlier you catch a potential problem, the easier it is to report and nip in the bud.

If you are still hesitant to sign up for monitoring, commit to checking your credit report frequently. Here are the top things in your credit report to keep an eye on: 

  • New account openings, including credit cards and loans

  • Name or address changes in your credit file

  • Updated public records, including court dates and bankruptcies

  • Unpaid accounts sent to collections

  • Hard credit inquiries

If anything is incorrect or misreported, be sure to report these errors to the credit agencies immediately. Again, the sooner you report a problem the less of a hassle it will be in the long term. You can check your credit report up to three times per year for free, so be sure to check every few months.

Tip Number 5: Refinance your Car Loan

Refinancing your car loan can help with almost any financial situation. If your expenses are a bit too high every month, refinancing to a lower interest rate and/or lengthening your credit payments can reduce your loan payment drastically. If you're looking to save in the long run, a lower interest rate and/or shorter payment period can save you hundreds or even thousands of dollars.

Refinancing can also help improve your credit score over time by making your payments more manageable, therefore making you more likely to pay them in full and on time. 

Interest rates are low as we enter the new year, and it’s always important to strike while the iron is hot. Nobody knows what the future will bring, so taking advantage of low interest rates while they are low is a great idea. At Auto Approve we are committed to saving you money and getting you the best deal possible. If refinancing sounds like it might be a great 2022 resolution for you, get a quote today to get started!

And those are our top financial tips for ringing in the new year.

Make 2022 the year where you take control of your finances. Creating a clear plan and forming good habits is the best way to make any resolution come to fruition. And if you have an auto loan, refinancing is a great first step to saving money. Be sure to get a quote from Auto Approve today and kick your new year off with a ton of savings!


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