Most of us are looking forward to putting 2020 in the rearview mirror, with hopes for a much healthier and brighter 2021. As you prepare for the new year, you might be thinking about setting goals and resolutions for the coming months. If you’re like me, you’re battling the “quarantine 15” and freshly focused on getting back in shape.
But there are other fitness goals you need to think about too -- financial ones.
It’s time to get serious about your financial situation. The events of the last year have caused economic upheaval for millions of Americans. Many lost jobs, faced furloughs or closed businesses. Just like you need to be honest about your physical shape when starting a fitness program, the same is true for your bank account.
If you are one of the lucky ones who remained fully employed, your financial priorities still may have changed. In fact, in a recent survey by Deposit America, a whopping 82% of respondents said the novel coronavirus pandemic forced them to change their financial priorities in some way. And when asked what their No. 1 financial priority is right now, consumers said paying off debt (25%), paying monthly bills (19%) and building an emergency fund (14%).
So how can you get started on money resolutions? Here are six tips to get your finances in great shape this year.
1. Build a Budget Plan. Thirty percent of Americans report they want to recreate their budget or start budgeting this year. Think of your budget as a personal road map for where you want your hard-earned dollars to go. Make a list of your priorities and goals for the future and examine your spending to see if it aligns with these goals. After that, make a spending plan and stick to it.
There are tons of budgeting software tools available to help you set up a plan. One free one we like is Mint. If you link your bank and credit cards to your Mint account, the software will automatically track how well you are adhering to your spending plan.
Mint allows you to set up budget categories and spending limits, as well as input how often expenses occur. It can also offer financial tips and show you where you can save money. Interested in what the percentages should look like for each budget category? Check out our article on “budget pie.”
2. Consider Buying or Refinancing Your Home. Mortgage rates are at an all-time low, and if you are considering buying a home, the low rates are certainly an incentive to do so. If you already own a house with a higher interest rate, refinancing might work well for you, especially if you plan to shorten the loan term. A shorter-term mortgage will have a lower interest rate, but your monthly payment will increase. However, if you can afford the slight increase, a refinance of your current home loan can result in substantial interest savings.
If you have served in the military, you are eligible for a VA loan that can make the process of buying or refinancing a home so much easier.
Here are some of the advantages of a VA loan:
- No down payment is required.
- No mortgage insurance is required.
- VA loan closing costs are lower.
- Borrowers can refinance without requalifying.
- Borrowers can utilize the refinance to pay off debt, make repairs or remodel.
- The VA offers help to avoid foreclosures.
- If you choose to pay off your mortgage ahead of schedule, there are no prepayment penalties.
3. Make Your Credit Cards Work for You. We all know the importance of our credit score, and chances are you have a few credit cards in your wallet. Choose cards that offer rewards and benefits that add up to savings you can use, based on your goals, interests and habits.
Most credit cards come with useful benefits, including price protection, rental car insurance, warranty protection and a free FICO score. Additionally, most cards allow you to earn rewards by leveraging your spending toward various programs, including cash back, points, airline miles, merchandise and gift cards. Take the time to read the benefit statement to take full advantage of the card and save money.
Websites such as CompareCards allow consumers to make informed financial decisions about which cards to choose by independently comparing interest rates, rewards benefits and cost savings. This side-by-side card comparison tool is visited by more than 1.5 million visitors each month. Try the tool for yourself to see if you have the ideal card for you and your family.
4. Compare Auto Insurance Rates to Maximize Savings. There are about 1.4 million active-duty service members and about 20 million veterans in the United States today. This group makes up about 7% of the country’s population, representing a small but significant demographic. If you fall into one of these categories, you are probably aware of military discounts on car insurance. However, not all discounts are created equally, and just because a company offers a military discount does not mean it is the company to choose for coverage.
The trick is to obtain different quotes and shop around to determine which company works best for you. With today’s technology, you can get free auto insurance quotes almost instantly from multiple companies based on your specific needs. We can help you find the best military, veteran or federal employee discount. Compare competing insurance rates and receive a quote in minutes.
5. Protect Your Assets with Rental Insurance. Simply put, you need to protect your stuff. Your landlord most likely has insurance on the building or dwelling you live in, but that does not cover the cost of replacing your belongings in case of fire, flood or burglary.
Perhaps as you glance around your living room, you don’t think you have that much to insure. Think again. How much would it cost to replace your smartphone, your laptop and all your clothing? What about priceless items like your grandfather’s watch?
Additionally, rental insurance protects you from personal liability. If someone is injured while at your home -- even the pizza delivery guy -- they could sue you. Most policies provide at least $100,000 of liability coverage and between $1,000 and $5,000 for medical-payments coverage.
And here’s the good news: Rental insurance is very affordable. Your premium will depend on various factors, including how much coverage you need, the type of coverage you choose, the amount of your deductible, and where you live. We can help you compare rental insurance premiums in minutes with our rental insurance comparison tool.
6. Prepare for the Unexpected. Service members are trained to face the unexpected and protect themselves and those around them. Life insurance certainly fits into that category. There are insurance options available to active-duty troops, veterans and their families, including government-sponsored programs and private-sector policies.
Active-duty service members are automatically provided with Servicemembers’ Group Life Insurance (SGLI), which can be converted to Veterans’ Group Life Insurance (VGLI) for up to the coverage amount you had through SGLI if you apply within one year and 120 days from your discharge.
Some military members choose the standard coverage. Others want a little more coverage than the government-sponsored policy offers and purchase a supplemental private-sector policy. Still others opt out of the government program entirely and buy a private-sector policy.
The maximum coverage possible from SGLI is $400,000. Generally, financial advisers suggest life insurance coverage of seven to 10 times your annual income. For example, if you’re an E-7 with a salary of around $58,000, you’ll want to make sure you have between $406,000 and $580,000 of coverage.
That’s where private insurance can fill in the difference. To learn more, visit our supplemental life insurance resource page. And if you're ready to compare policies and rates, get started now with our free life insurance tool, which compares rates and matches you to the coverage you want.
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