Contributed By- Amy Nickson
What financial steps should you take in 2016 to start out on the right foot? Take a glance at the previous year and assess any financial mistakes you’ve committed. Hindsight is 20-20, but learning from earlier errors is extremely important.
Here are the 9 tips to improve your personal financial health in 2016.
- Be intelligent
If you’re an investor, then you have to maintain financial discipline. Try to develop effective asset allocation skills and invest your dollars on the best assets.
- Formulate a budget
The first step towards getting your finances in perfect order is to formulate a budget. Budgeting helps keep a track of your hard-earned money and where it goes. Most of the financial experts believe that a proper budget can help people get their finances in order.
Budgeting is planning your expenditures wisely, thereby helping you to balance your income and expenditure, and determine your savings. Formulating a budget that you can stick to will ensure a year of financial success.
- Be careful when taking out a home loan
If you delay in closing your mortgage loan, then it’ll not only kill your entire deal but also cost your security deposit. Submit the required documents as early as possible. Check with your lender whether or not the process is going as anticipated.
- Don’t close your credit accounts all of a sudden
Planning on putting your credit cards on ice? If so, don’t jump the gun and close down your accounts. Closing down accounts that have a balance will hurt the credit score. This, in turn, will create a problem later. So, repay an account and then close it.
- Play a safe game
If you’re investing in stocks, then you may not be sure about the returns. If a portion of your portfolio is entirely dedicated to the dividend-paying investments, then you may expect that at least a part of your return will be more predictable. While dividends don’t always ensure the highest possible gain, they usually are strong indicators of a company’s ability to reward investors.
- Try to dissolve financial obligations
Racking up debt is easy but paying it off is not. If you have multiple credit cards, then try to maintain a list of all the cards and make the payments accordingly. Making only minimum payments each month will cost you a bundle in interest cost, so make sure you’re paying off as much as possible.
- Stay updated
The banks are always on the headline and making news by introducing new debit and checking fees. The best way to ensure that you don’t end up being subject to the new banking fees is by staying updated on the new rules. While regulations require banks to send out disclosures, customers may miss out the details.
- Repair credit before refinancing
Good credit is the key. If you opt for a refinance, then make sure you repair your credit so that you can grab the loan at an affordable rate. Also, pay down your credit card bills before a refinance so as to lower the DTI ratio. This will save your dollars.
- Contribute to the retirement account
If the employer offers you a 401 (k) or RSP (Canada) plan, then you should accept it and start contributing to that account. This account helps you achieve tax benefits and you will get a lump sum amount as you retire from the job. You can even withdraw money from the account without having to pay any penalty fees after your retirement. You’ll be able to use this money for paying off your debts and other financial obligations.
Do things differently to avoid chaotic financial life in 2016. You should also maintain a savings account and put money into it each month. If you have lots of regrets regarding financial decisions, then make sure you take the best steps forward in 2016 and avoid financial problems.