Every New Year is a new opportunity to create goals to improve yourself. These new year financial goals can range from health, fitness, relationships, and career to finances. At F&M Bank, we are most interested in helping our clients improve their financial health. If paying off debt, saving money, or having extra cash is one of your financial goals, we have gathered seven of the best financial goals for 2021.
Goal setting is necessary to reach long-term financial goals. Take these tips to help you develop a financial plan.
1. Pay Off Debt
Paying off existing debt is one of the first and most important steps to improve your financial status. Having debt will hinder your efforts in completing every other goal on this list, so we recommend starting here!
Every month, credit card companies and loan providers charge an interest fee on borrowed money. When not paid off, credit card companies collect large amounts of interest, while you have higher and higher bills to deal with. Now, just think about what you could be spending that interest on instead.
Paying off credit card debt can seem impossible, but once you get the ball rolling it becomes easier over time. As you pay down debts, you will be paying less in interest and have more money to make higher payments. And with higher payments, the sooner you can pay off your debt.
TIPS TO PAY OFF DEBT
Create a budget and stick to it. Using the Dave Ramsey cash method is a great tactic.
Pay off your debts in the smallest to largest order. As you pay off those debts, the same amount of money put toward them should roll into the next debt payment in line. This is also known as snowballing your debt.
Pay more than the minimum payment. By only paying the minimum, you will have wasted massive sums on interest and stay in debt for much longer.
Don’t add to the debt. Stop spending, stop using your credit cards. If you don’t have the cash to buy something within your budget, you must wait.
2. Build an Emergency Fund
You will want to build an emergency fund with any extra money and set it aside. Try to save up at least $1,000 at first, and then work towards saving up for at least three months of expenses.
These funds should not be used unless you have an emergency or unexpected life event. Having money set aside will allow you to pay for these unplanned events and not dig your debt hole deeper.
Keeping this money in a separate bank account or put away in a safe can help make sure you don’t accidentally spend it. Many bank accounts are free when a minimum balance is met, often around $1,500. This amount is a great goal to set for your emergency fund.
You can begin saving for retirement at any age. Knowing how much money it will take to reach your retirement financial goals will influence how much you should save every month. Saving for retirement can be confusing, and it’s hard to know where to begin.
If your company offers a 401(k) plan, that is a great place to start saving money. Often, employers will match up to a certain amount of money invested each month. Who doesn’t like free money?! A Roth IRA is an account you can open for yourself to start saving with higher returns.
A recommended amount to save for financial security is 12 times a year’s salary before retiring. You may want to consult a certified financial planner to help you toward your money goals.
4. Improve Your Credit
A credit score allows lenders to decide if you are responsible with your money or if lending to you is a risk. Having a great credit score will allow you to get better rates on big purchases. Improving your credit score may also allow you to negotiate with your credit card company for a better rate.
While the ultimate goal would be to save enough money that you do not need to borrow, that could be difficult with a home purchase. Great credit will help you get the best mortgage loan or student loan rate possible.
Tips for raising your credit score:
Pay off your credit cards and loans
Make on-time payments
Don’t apply for more credit
Dispute inaccuracies on your credit report
Although some delinquencies may stay on your report for 7 years or more, improving your personal finance with the above tips can significantly change your score over a matter of months.
5. Purchase a Home
A home purchase is likely the most expensive purchase a person will make in their lifetime. It is not one to take lightly. This financial goal will require combining some of the other goals on this list to make the most of your money.
Follow these tips to get the highest loans at the lowest rates:
Check your credit score and work to improve it. Mortgage loan rates are directly related to credit scores.
Pay off debt. If you already have debt, the mortgage loan amount you will be offered will be lower.
Save a down payment. While there are many loan products with lower down payment options, the traditional 20% down is still smarter. You can avoid PMI, get a lower interest rate, and end up paying less in the long run.
If your finances are already in order, you may be wanting to splurge on yourself and your family. You can still have a great time and be smart with your spending.
How to have a great vacation that is financially smart:
Figure out where you want to go, what you want to do, and how much that will cost.
Plan an extra amount as a buffer for unexpected fun or travel changes.
Put the vacation fund aside and separate it from your other finances.
Look for ways to cut expenses and put all that extra cash in the vacation fund. Cook more meals at home, and maybe cut out a few shopping trips.
If cash is tight, find ways to make some extra side cash. Working for a ride service or dog walking company can be a great way to make extra money around your schedule.
7. Buy a New Car With Cash
Buying a car with cash sounds unreachable at first, but it’s a very achievable goal. A cash buy is easiest to do if your current car is already paid off. If it’s not, you could start with a plan to pay off your debt.
Decide what car you would like and research its value.
If you are ok with a slightly used car, it’s a great idea to let someone else take the price hike that comes with the “new” sticker.
Calculate how much you can afford to put away each month, and this will determine how long you will need to save.
When it is time to buy, make sure you look at all cars in the area and check Kelly Blue Book to make sure your quote is fair.
Get your quote in writing before you discuss financing options.
If the price isn’t right–walk! It’s your hard-earned money, so make sure the deal feels good and that you aren’t pressured to buy.
Improve Your Finances with Help From F&M Bank Financial Advisors
Having financial goals are essential to make sure you make the most of your hard-earned money. Goals will keep you on track and help you make smart decisions on how you spend. The financial team at F&M Bank in Tennessee can assist with making your goals a reality. We can help you pick the savings, checking, and retirement accounts right for you. And if owning a home is on your to-do list, we offer great mortgage products and rates, as well. Our offices are located throughout Middle Tennessee. Stop by in person to talk with our team!