January doesn’t just signify the start of the year – for many, it also signifies a brand new chance at life. And while it’s fair to say that not all of us will achieve our new year’s resolution, there’s no denying that it’s fun to make a list of things that we want to achieve for the year. Not yet done with yours? Here are 6 financial goals you definitely need to have this 2020!
1. Have an emergency fund
How much money do you currently have in your bank account? If your answer is less than your monthly salary, then perhaps having an emergency fund is the first financial goal that you should set for the year.
In fact, experts say that you should ideally have at least 6 months’ worth of your monthly income in your bank account for emergency purposes. This means that if you’re earning $4000 a month, the ideal amount in your emergency fund should be at least $24,000. It’s not a small amount, but it covers you in case of unexpected financial pitfalls such as losing your job, falling ill, or getting into an accident.
Having access to a special fund allows you to have sufficient time to recover from your losses or find a new job, just in case. Plus, it provides you peace of mind knowing that you have something stashed away from the rainy day.
2. Pay off all credit card debt
Then again, if you’re dealing with credit card debt, you may want to hold off on the emergency fund first.
Around 61% of all adult Americans are struggling with credit card debt. According to Experian, the average balance sits at roughly $6,000, which is quite a lot considering that the average monthly income in the US is $5,000. Depending on your credit card and credit score, you could be paying anywhere from 7% up to a whopping 36% interest. This is definitely enough reason to tackle your debt first before anything else.
3. Improve your credit score
Credit scores are very important, for the sole reason that many financial institutions depend on them to assess your eligibility.
For example, if you’re planning to finance a car, the auto dealership will take a look at your credit score first before determining how much interest rate will be applied to your loan. Same thing with taking out a mortgage for a new house.
How high should your credit score be, you may ask? Well, it should at least be in the 700 range, and certainly not less than 600. Luckily for you, there are many ways to increase your credit score without much effort. This includes paying your bills on time, making sure you don’t have any outstanding debt, and closing any unused accounts.
4. Save more money
We all want to save more money, but it can’t be denied that saving money is not something that can be learned overnight. Especially if you grew up in a household that didn’t prioritize saving overspending, you probably would have to dedicate some time to teaching yourself new money-saving techniques and learning how to be more disciplined.
One of the easiest tricks to saving more money is to simply set up automatic transfers from one bank account to another. Let’s say you receive your monthly paycheck in bank account A and you keep your savings in bank account B. Make sure that you set up auto-transfer between the two accounts on your salary date so that you won’t be able to withdraw or use the money. The upside to this is, one, there’s no chance of you forgetting to save, and two, you won’t notice that the money’s gone from bank account A. Removing just one step from the process can go a long way.
5. Generate another income stream
You can’t just rely on your day job to pay for everything you want and need in life – unless you’re alright with working every day for the rest of your life, that is.
With the way things are going in our economy right now, even a few extra hundred dollars a month could mean the difference between stressing out over bills at the end of the month and having enough time to relax and spend time with your family. It makes sense to find another way to generate income, preferably a passive one.
6. Save up for retirement
It’s better late than never, they say, but when it comes to retirement savings, late is almost just as bad as never.
Indeed, it’s never too early to start saving for your retirement years. Make it your goal this 2020 to stash even just a hundred dollars or so every time you receive your paycheck. Put it in long-term and high-yield investments and you’ll be well on your way to a great retirement before you know it.