According to Better Homes and Gardens, the following 50/20/30 distribution rule for our monthly income should be followed: 50% spent on necessities; 20% in a savings fund; and 30% as splurges (i.e. movies, dining out; that fabulous pair of shoes, and so forth). We’ve been discussing financial resolution this entire month and, hopefully, readers are already putting some advice to good use. Today’s column, compliments of WalletHub, one of the savviest sites around, completes the series (but by no means conclude many-more-to-come financial tips) so do read on, as well as continue to utilize earlier guidelines.
* Repay 20% of your credit card debt. Americans owe over $1 trillion overall and roughly $8,700 per household. WalletHub believes the best bet is to resolve to make a plan to pay off 20% of what you owe over the course of 2020 (about $1,740 for the average household). This monthly requirement means a card offering 0% on balance transfers for at least twelve months whereby you pay $145 monthly. If you can afford higher payments, go for it; the sooner you pay off the debt, the more liberated you’ll be! And, again, as so many Americans have no rainy-day fund, try to save one month’s pay to your emergency savings. Obviously, it’s important to understand this won’t happen in a blink. Don’t put the rest of your financial life on hold until your emergency fund is complete; just like a layaway plan, divvy up this twelve-eighteen months’ savings into monthly payments deposited in your “Christmas Club” account.
* Pay bills right after getting your paycheck. Frankly, it’s crucial to pay your “need” bills before paying your “want” ones. Not only does this strategy provide us a better sense of what we truly can afford, it also helps avoid ever having a late payment reported to the major credit bureaus. (Remember, I’ve cautioned ad nauseum over the years to prevent this reporting at all costs so as not to damage those potentially-life altering credit reports.)
* And speaking of checking our reports (see last week’s column), sign up for credit monitoring. As many as one in four of us consumers have an error on one or more of our three reports, according to research by the Federal Trade Commission. On the other hand, reviewing at least one of our three on a regular basis allows us to spot signs of fraud before they get too serious. (Thanks to WalletHub for gifting us a free TransUnion credit report.)
Even though we may opt to receive a free report quarterly or even pay $39 for a monthly report, Freddy Fraudster has much too much time in between to steal us blind, including the worse theft of all — our identity. I urge readers to investigate free credit monitoring; while a couple of other avenues are available, I tend to prefer WalletHub that enables savvy consumers to receive an instant notification anytime an important change occurs to the credit report(s). Also, please save all those tax forms which the mailperson drops off. Even better, scan and save them in a folder for tax documents as soon as they arrive so nothing gets lost.
* As we all know, our credit scores not only prove our spending — possibly squandering — habits, the former additionally cements our future credit lives. While the average American has a score of 683, which truly isn’t enough to write home about, all of us should strive to improve our scores by 20 points. Whoa, you holler! With fewer than 1.6% of people having the highest credit score possible (850) and fewer than one in five folks having an 800-point perfect score, consumers can save themselves a great deal of money by increasing their scores. I’ve written in the past about the techniques to accomplish this so I won’t repeat them today; nevertheless, what does bear repeating is we all have the ability to bring up both our scores and our bank balance.
* Focus on your physical health as there’s a clear connection between physical, emotional and financial wellbeing. For starters, the average person spends right at $5,000 upon health care each year (and others of us spend lots more than that – thank heavens for Medicare!). And, according to the American Psychological Association, money is also our biggest source of stress; plus, people who get regular exercise tend to have better credit scores.
* Be on the search for a better job. Combing local job postings isn’t enough, though. Those pursuing better positions might, if necessary, need to move while searching for higher wages, a lower cost of living or, perhaps, a return to school to gain/enhance specific skills to increase earning potential. Be certain to thoroughly explore, however, as all parts of the country don’t offer the same earnings potential. For example, according to WalletHub research, the best city for jobseekers in 2019 — Scottsdale, AZ — has 111% more job openings per unemployed resident than Fayetteville, NC, the worst city for career exploration.
Let’s all pledge to renew January’s resolutions for the entire year and make 2020 the healthiest financial period ever!
Contact Ellen Phillips at c[email protected].
