Five Financial Resolutions for the New Year
The new year is a great time to commit to changes in your life—including financial changes. Many Americans continue to struggle with debt and a lack of savings, which has caused incredible stress during a topsy-turvy year. Now is the best time to adopt a few, commonsense resolutions that will set you put well for success when 2022 rolls around.
Create a Budget
You can’t save money until you know how much you spend. And that requires budgeting. Look at your expenses for December 2020 to see what you spend on and how much you spend. If you have no idea how much you spent, track everything in January. Then find where you can cut so that your expenses come in below your income.
Budgeting has many advantages. It forces you to think about your spending. You might also identify that you really need to boost your income by taking on a part-time job.
Build an Emergency Fund
Too many people are forced to pull out their credit cards when their car breaks down or they suffer a bout of unemployment. Credit invariably comes with interest payments, and credit card interest rates are usually very high.
Try to build an emergency fund in 2021. Start small. You should try to budget as much as you can and put it in a savings account where you don’t touch it. Some people can only put $10 a week away, which is fine. As Fox News notes, the best way to accomplish a goal is to break it down into smaller micro-goals. After a year, you’ll have a little over $500. If you can put away $20 a week, you’ll have $1,000.
Debt drains money out of a budget and makes it hard to ever get ahead financially. Once you begin paying back debt, you’ll free up money that used to go to interest. Debt payment should be part of your budget. But there are other techniques that can help shrink debt.
For example, you might consolidate your debt using a balance transfer or a personal loan. By using a low-interest loan to pay off higher-interest debts, you reduce your monthly debt payment.
There’s no better way to wipe out certain debts quickly than bankruptcy. By filing for Chapter 7 protection, for example, you can eliminate credit cards, personal loans, and medical debt in a matter of months. People who cannot get a loan to consolidate debt should consider bankruptcy. In fact, all people who feel their debts are out of control should consider this option.
Catch up on Family Support Obligations
Some debts can’t be wiped in bankruptcy. At the top of the list are family support obligations, like child support and alimony. If you have unpaid support, then you need to pay back everything you owe, otherwise your wages will be garnished.
Of course, if you file for Chapter 13 protection, you can catch up slowly over the length of the repayment plan—and avoid garnishment. In any event, you will need to pay what you owe and soon.
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