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How To Start Setting Up Your Financial Future Today

It’s never too early to set up your financial future. If it’s not one of your resolutions for the new year, follow these steps to make it one.

How hard is it to start setting up your financial future? Not hard at all, which is a good thing since it’s so crucial to do.

As simple as the following steps may seem, they’re recommended to start fixing your finances this year so you can flourish in the future.

1. Fix your credit.

Bad credit can keep you from buying things like a home or car at the lowest cost possible. It can result in higher interest rates, or it could prevent you from getting any financing at all.

Do you need to pay an expert to start fixing your credit? No, you just need to get your free credit report and start looking for any mistakes.

Are there any accounts that are reported as past due, even though you’ve always paid them on time? Call the company to get them removed so you can boost your credit score.

At the same time, keep your eyes peeled for any accounts you may have forgotten about. Any delinquent accounts or even missed payments could negatively impact your credit, so you’ll want to address them as soon as possible.

2. Tackle high-interest debt.

Paying off debt can take a significant load off of your back. When paying it off, tackle the debt that has the highest interest rate first.

The higher the interest, the faster the debt can grow. This is why high-interest loans should receive priority when it comes to paying.

If you want to make certain loans easier to pay off, consider refinancing them. The Fed’s announcement of reduced interest rates means you could pay less interest and have lower monthly payments. Both will help you pay off debt faster.

3. Build your emergency fund.

Whether it’s to cover car repairs or an unexpected medical bill, having an emergency fund protects your finances.

For instance, let’s say you only have $500 in your emergency fund, but you need a car engine repair that costs $1,500. How will you pay the rest? By putting $1,000 on a credit card, which instantly puts you in debt.

If your emergency fund were larger, you wouldn’t need to go into debt. You could protect your credit score, avoid monthly payments, and have added peace of mind that comes with being debt-free.

For these reasons, many suggest you should have three to six months of cash for emergency expenses. If you don’t, now’s the time to start adding to that fund by cutting other costs, such as entertainment.

4. Contribute more to your retirement.

Add at least a one percent contribution to your company’s 401(k). It can boost your retirement fund in a big way as the years go by.

Don’t have a 401(k)? Open up an IRA and make small contributions to it. The move will only take a few minutes to make, but it can provide security for years to come.

If you don’t have much extra income to contribute to your retirement, don’t fret. Something is better than nothing, so put away what you can.

5. Change your mindset from spending to saving.

Challenge yourself to stop spending so much and start saving more. You can do this by cutting back on little things like eating out.

For example, you may eat out every Friday night, resulting in a bill that’s $100, on average. Instead of putting that towards food, put it into your emergency fund.

Over time, you’ll be surprised at how much money you can sock away for a rainy day. And you can use this trick to save for any goal, including retirement.