Boost Your Financial Confidence in Three Steps
Jan 16, 2025
Kick off the new year right with more financial confidence! No matter what your financial resolutions may be, everyone can benefit from a little more organization and realistic goal-setting. Follow these steps to hit the ground running!
Step One: Organize Your Paperwork
If you have a huge pile of mail and other paperwork cluttering up your home, now is the perfect time to finally get it all organized!
Start by reducing the volume of papers you have to deal with. To borrow a tip from professional organizer Marie Kondo, sort your paperwork into three piles:
- Limited term such as tax documents and warranties
- Long term such as birth certificates and passports
- Currently in use such as unpaid bills
Anything that doesn’t fit into those categories, recycle or shred right away.
Once you’ve reduced the volume, now you can start filing. It may take some time to find the filing solution that works for you, but here are a few ideas to get you started!
1. Keep your “action items” (such as bills or invitations requiring an RSVP) in one inbox together.
2. Consider going digital – some physical documents can be transferred to your computer by scanning them.
3. Store your long-term items in a fireproof lockbox.
4. Try color coding your filing system.
5. If you run a business from home or otherwise have a lot in the limited-term pile, consider separating them into further categories such as reports, client documents and billing invoices.
Step Two: Identify Your Financial Weak Spots
Set aside some time to look over your finances and find areas where you could improve. As you conduct your financial checkup, take stock of these metrics.
1. Your credit score. Credit scores range between 300 and 850. The higher your score, the better –above 740 is considered very good. However, if your score is below 670, you may struggle to get an affordable loan.
Check your credit score within online banking for free. If it’s lower than you’d like, make a plan to improve it. View learning materials and get extra help if you need it on our Financial Wellness page.
2. Your debt-to-income ratio. Generally speaking, the lower your debt-to-income ratio, the better your financial health. A lower ratio means you owe a lower amount in relation to the money you earn each month.
If you have older, higher-rate debts, a debt consolidation loan or refinance could help you save on interest and make it easier to pay off.
3. Your emergency fund. Do you have one? If you do, is there enough cash to sustain you for 3-6 months in the event you cannot work for a while? Start or increase your emergency fund by setting a savings target and calculating how much you would need to save each month to meet it.
We recommend keeping your emergency fund separate from your regular savings, such as in a secondary savings account.
4. Your retirement savings. The rule of thumb is you need about 80% of your annual income to maintain your lifestyle in retirement. Are you on track? Make sure you are taking advantage of any employer 401(k) plans or similar options. If you’re over 50, you’re allowed to make catch-up contributions as well. The earlier you start saving, the better!
5. Your overall financial stress. And finally, how do you feel about it all? If your finances are making you so anxious you can’t sleep or you feel ill, that’s a sure sign that you may need to make changes.
Step Three: Set Obtainable Savings Goals
Your plan will be unique to your goals and overall situation, but there are still universal tips that could benefit you.
1. Be specific. Don’t just say you’ll “save more” – commit to saving a certain amount each month and re-evaluate every few months.
2. Set a deadline. Use this as a goal post to measure your progress and keep you on track.
3. Break down larger goals. Instead of saving $200 a month, try saving $50 a week. Instead of saving for a whole vacation at once, try saving for plane tickets first.
4. Automate your goals. This way, you won’t forget to move money to your savings account once a month (or more). Just be sure to check in on it every few months.
Help yourself feel more confident in the new year with these tips! If you need an extra hand navigating your options, we offer professional investment assistance as well as a host of other financial educational resources and tools.
Links:
https://www.hondafcu.org/investment-retirement/investment-and-retirement-planning
