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Starting financial resolutions
Jeff Rose, a certified financial planner, explains what you can do now to set yourself up for a prosperous 2021.
TAMPA, Fla. - When it comes to New Year’s resolutions, money and finances are usually high on the list for most people, but you don't have to wait until the new year to start.
With the way that 2020 has turned out, any leg up we can get on 2021 can greatly improve our overall financial landscape.
Let's face it, most Americans are stressed to the max about their financial situation. Even before the pandemic, a survey by John Hancock found that 40% of respondents are already feeling extreme financial stress. That number has soared 20% to more than 60% of our population now feeling the burden about our uncertain economic future.
2020 isn't over yet, so we still have time to start knocking out important financial tasks. There are several things that we can take care of. This week, I'll cover Part One, but be sure to stay tuned for part Two next Wednesday on Good Day Tampa Bay. Let's go ahead and start knocking out some of these important financial steps now.
Organize your financial Life
When's the last time that you needed an important financial document, like a tax return, health insurance card, or an important password? If you've been in a situation where you needed to provide an important document, but you were unable to locate it, you understand how frustrating it can be. It's important to have an emergency file with all of your important documents in it.
Preferably, it's stored online with proper encryption, so it can be accessed when you're not at home. Documents could include your health insurance card, insurance policies, estate planning documents, such as will and power of attorney and living will, a list of all your financial accounts with usernames and passwords. Wherever you decide to store it, make sure that your beneficiaries to your estate know where it is and can access it if they need to.
Start, or add to, an emergency fund
With unemployment reaching unprecedented numbers this year, it was a shocking reminder of how important it is to have cash on hand. Your goal here is to cover a minimum of three to six-month expenses, more if you're financially able.
All money held in your emergency fund should be invested in a high yield savings account, earning the most interest possible. It also would be a good idea to make sure that your checking accounts are also paying a decent interest rate.
Protect your family with life insurance.
If you are the sole breadwinner of your family, then you absolutely need life insurance.
Some people make the mistake of purchasing life insurance through their employer. While any coverage is good to have, if you were to lose that job -- a definite concern with the pandemic -- then your life insurance policy may not come with it.
It's preferred to secure a life insurance policy with a third party. It should be also noted that COVID-19 has impacted the life insurance industry. You can learn more about how life insurance policies have been affected here.
Understand your credit and debt.
Download your free credit report. The FTC conducted a study and found that one in five Americans has an error on their credit report, which amounts to over 44 million consumers.
Of those, over 20% had an error that was negatively impacting their credit score, which in turn could be costing more money. One of the easiest things that you can do to find if you have an error is to download your free credit report and see if you have any errors that need to be fixed.
Audit all of your automatic payments.
Disney+ at $6.99 per month might not sound like a lot. But when you stack that with all the monthly subscription payments you are making, it can add up really quickly. A simple way to catch any payments that you no longer need is to review your financial statements each and every month.
Don't lose your credit card rewards.
Credit card reward points are awesome, so as long as they get used and don't expire. For many, travel has been non-existent due to the pandemic. Because of that, reward points could be accumulating but could expire before year-end.
Many card issuers have extended reward points until the end of 2021, but it is a case-by-case basis. Log in to your credit card company's website to see if there are any updates about your points.
Make a plan to pay off your debt.
If getting out of debt is one of your big goals for the upcoming year, then the worst thing that you can do is mimic an ostrich and bury your head in the ground. You have to know how much debt you have and how much interest you're paying on this debt.
Simply jotting down all of the debts, the interest rates, and your monthly payment on a sheet of paper can give you a snapshot of all the debts that you have to tackle so that you can identify which ones to pay off first.
Some financial experts suggest paying off the debts with the highest interest. Whereas, Dave Ramsey recommends the debt snowball method where you identify the smallest debt to pay off. The idea here is that you can build momentum by paying off one debt to give you confidence in paying off the rest.
Okay. That's a lot of financial tasks for you to get started. Stay tuned for Part Two next week on Good Day Tampa Bay.
Jeff Rose is a combat veteran, certified financial planner and founder of GoodFinancialCents.com