Change has to start somewhere, and for many people that change is easier when the starting point has meaning. It can be a birthday, anniversary, or any other date with a symbolic weight. Most often, people choose the beginning of the new year.
If you're looking for New Year's resolutions that will really change your life, it's a good idea to adjust your financial strategy. Here are five things you can do in 2021 to take your money gambling to the next level.
Interest rates are near all-time lows, making this the perfect time to refinance your debt. Refinancing means switching your loans from your current lender to a new lender in order to benefit from a lower interest rate. Refinancing can save you thousands of dollars depending on your original interest rate and total balance.
For example, let's say you have a 30 year mortgage of $ 200,000 at 5% interest and you are refinancing at 3% interest. Your monthly payment is $ 244 lower and you save $ 31,173 in total interest over the life of the loan.
You can refinance auto loans, personal loans, and even student loans. However, if you have federal student loans, you may want to withhold refinancing. Refinancing a federal student loan converts it into a private student loan. This means that you forego additional perks and benefits such as income-based repayment plans and options for grace and forbearance.
Transfer credit card debt
If you have credit card debt, you can pay less interest by transferring the balance to a new card with 0% APR on the balance. These special discounts usually last between 12 and 18 months. During this time you will not be charged any interest on the credit card balance.
For example, let's say you have $ 5,000 in credit on a card with an annual interest rate of 17%. If you only make the minimum payments, you will pay a total of $ 1,223.61 in interest. If you transfer this balance to a 0% APR card for 12 months and then repay the balance during that time, you will not pay any interest.
There is often a small fee associated with balance transfers, around 3% of the balance transfers. For example, if you transfer $ 5,000, you will pay a fee of $ 150. This leaves a net saving of USD 1,073.61 in the scenario described above.
Reduce your fixed costs
One of the best ways to get your budget in 2021 is to cut down on fixed costs like car insurance, internet, cable, and cellphone. Call these providers and try to negotiate a cheaper rate.
Go through your transactions over the past few months and make a note of all recurring subscriptions such as Netflix, Amazon Prime and DoorDash. Then group them into categories such as "use often," "use sporadically," and "rarely use." Consider breaking off anything that you rarely use.
See if you can get a better deal on your most popular subscriptions. For example, if you and your significant other both pay for Spotify Premium, you'll get a Spotify Duo account instead and save $ 83.88 per year.
Open a better bank account
Most people lack an easy way to make money from their bank account. You could leave hundreds of dollars on the table if you still have a traditional savings account.
According to the FDICthe current average interest rate for a savings account is 0.05%. Many high yield savings accounts offer interest rates between 0.40% and 0.60%.
Let's say you have $ 10,000 in a savings account with 0.05% interest. After one year, you will have earned $ 5.04 in interest. If you move this amount to a high yield savings account with 0.5% interest, you will earn $ 49.92 in interest over the same period.
If you are new to investing in retirement, this may be the most important financial solution you can meet. Thanks to them Power of compound interestYou can start investing now and see tremendous growth when you are ready to retire.
IRAs and 401 (k) s are the two main retirement accounts. Anyone can open an IRA, while only those who have access to an employer-sponsored 401 (k) can open one.
If you are unsure of how to invest in your retirement account, you should consult a qualified financial planner about that National Association of Personal Financial Advisers (NAPFA).
If you're not ready to work with a financial planner, you can use a robo-advisor like Betterment or Wealthfront to create a portfolio based on your age, income, and expected retirement age. Robo-advisors have low fees and are designed to help beginners.
How to keep financial resolutions
Start small first. At a time, pick one habit that you want to change. Trying to achieve five goals at the same time will quickly burn out and give up.
When you decide on a solution, break it down into smaller, more manageable tasks. For example, if you want to talk to a financial planner about investing, break it down into the following steps:
1) Research financial planners via NAPFA
2) Send introductory emails to three financial planners
3) Choose the one that suits you best
4) Schedule a consultation
Give yourself a deadline to complete each of these tasks and ask a friend to hold you accountable.
Another tip is to bind your resolutions to a bigger goal. Like dieting or starting a new exercise plan, changing your financial habits is difficult. If you're used to having lunch with your co-workers every day, bringing leftovers from home seems like a big change.
The key is to envision the future version of yourself that will benefit from the changes you make today. If your goal is to open and contribute to a retirement account, introduce yourself as a senior living comfortably.
If you are tempted to skip this month's retirement contribution to buy concert tickets, think about your future you, what you want for them, and how they would appreciate your sacrifice. It can also be helpful to remember some of the financial mistakes you made in the past and how much easier your life would be now if you had made a different choice.
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