The end of one year and the start of another has always been an opportunity to reassess your financial habits. But after a year like 2020, your finances may need some extra TLC.
It doesn’t matter if you lost your job due to the coronavirus, earn a fraction of your normal wages, or are just worried about the future — check out these financial resolutions. They’ll help you set good money habits that will serve you all next year — and beyond!
Resolution #1: Start Using a Budget
A budget isn’t just for people who can’t pay their bills every month. This spending plan is for anyone — whether you’re earning minimum wage or pulling a six-figure paycheck.
Everyone stands to benefit from an organized look at their cash flow. It helps you direct money where it needs to go, prioritizing bills and savings over splurging on the fun stuff.
A budget can be a handwritten tally of your expenses and pay, or it can be a modern app that organizes your spending on your behalf. Choose the one that fits and try giving every dollar a task at the beginning of each month.
Resolution #2: Save for the Unexpected
Unexpected emergencies happen. Your furnace may break down without warning the same day your dog eats chocolate, and someone rear-ends you on the way to the vet. How will you pay for these bills?
Without savings, you may need to borrow an online installment loan. There’s just one caveat. Online installment loans direct lenders recommend using this product as a temporary stopgap — not a permanent substitute for savings. So while they may be a great option in extraordinary circumstances, you shouldn’t rely on them for every emergency.
But don’t beat yourself up if you have to take out an installment loan. Instead, only borrow what you need and focus on what you can do to build up your emergency fund.
Resolution #3: Focus on Building Your Credit History
As anyone who’s taken out installment loans for bad credit will tell you, bad credit changes the way you borrow. It limits how many financial products for which you qualify and raises the rates on the ones you do.
That’s because lenders check your credit score to determine the risk you present as a borrower. A bad credit score indicates a borrower struggles to pay on time and frequently maxes out their credit cards. There’s a risk they’ll continue these bad habits with the next loan, so lenders will raise their rates.
If borrowing is in your future, having a good credit score will save you money — whether you plan on taking out a mortgage or an installment loan.
Improving your score relies on good money habits like paying your bills on time, which may be easier to do now that you’ve pledged to use a budget. But your payment history is just one of five factors of your credit score, including:
- Credit utilization
- Account mix
- Account age
- Frequency of new applications
You’ll have to give them some attention to make the biggest impact on your credit. If you’re successful, you may qualify for more affordable rates and terms the next time you borrow.
Are You Ready to Set Good Habits?
Once you’ve popped the champagne and sang the last verse of Old Lang Syne, it’s time to look forward to the new year ahead. You’ll feel a lot more optimistic about 2021 when you set these new year’s resolutions, so why not start them now? The sooner you lay the groundwork for these habits, the faster you’ll make them a reality.