This post is sponsored by Credit.com.
While most millennials are setting New Year’s resolutions about their health, career, and relationships, one of the main areas that they should consider as we start the new year is resolving for improved financial health.
Whether it’s budgeting, spending, or improving your credit, you should review these tips before making any big financial decisions this year.
Check Your Credit Score
If you have never checked your credit score, or haven’t in recent months, the start of the year is a great time to get a gauge for where you stand. Your credit score gives an indication as to your borrowing ability, especially on large purchases such as a home or a car.
If you don’t know your credit score, you wouldn’t be alone. According to a MoneyTips survey, less than 53% of adults under 30 know their credit score.
It’s important to check your credit score now, because even if you don’t plan to make a large purchase soon, you will want time to improve your credit if you find out it’s not as healthy as you expect.
For me, I was glad to have a good grasp on my credit score well before I even thought about buying a house. It meant that I was given the best possible interest rate at the time of buying because lenders could trust I would make my payments on time, every time.
Don’t wait until you reach out to a realtor to start home shopping to figure out if your credit score is good enough for a mortgage. If your credit score is not well enough for an attractive mortgage, you could end up paying thousands more over the life of your loan.
I recommend getting your free credit score report on Credit.com. When you sign up, they will ask you some questions that verify your identity. Some of the questions may be challenging, in order to ensure it’s actually you, so they can provide an accurate report.
You have the option to select why you are checking your credit score, so that you can get recommended content around your goals. You can also get personalized recommendations after completing your profile on the site.
When you get your credit score, you will get your credit score number, where you land on the scale from bad to excellent, as well as grades on payment history, debt usage, credit age, account mix, and credit inquiries. You can create a plan to improve your score towards a target number that the tool suggests.
Checking your credit score is not necessarily fun, but neither is weighing yourself before the new year. Weighing in after you have lost weight is fun though, so think of it as a starting point. Checking your credit score allows you to know your starting point and set appropriate goals.
Assess Your Debt, Bills, And Income
Once you have checked your credit score, you will have an idea if there is any debt you need to get in check. If you have not been consistent on payments of any loans, start by making sure you are satisfying the minimum payments on all your debt. Once you are ready to start taking a more aggressive approach to paying down your debt, read more here.
If you don’t have a full understanding of all your bills, both fixed and lumpy, take the new year as an opportunity to review previous credit card and bank statements to set up a budget. Even if your first budget is just a reflection of your current average spending month-to-month, you have to start somewhere. In fact, a good starting point is to review these five habits to master before you turn 30.
The last area to evaluate at the start of the year is not one you may hear too many people talk about, as many think it doesn’t change your financial picture much. Your income actually makes a big difference, even if you are salaried! Freelancers know this well, but even those who are paid a regular salary should consider if their current income meets their financial needs.
If your salary isn’t cutting it, consider what you can do to make more money. If you are looking for creative ways to earn more income that fits your lifestyle, think about a few ways that your parents never would have earned money.
Set Your Goals For The Year
Have you ever heard the phrase, “Don’t try to boil the ocean?” This wisdom applies to your financial health this year as well. Don’t try to fix your credit score, save aggressively for retirement, and buy a new house all at once.
If you can narrow your financial goals for the year to one primary goal, this will help you make significant progress towards your end goal. For example, if you are trying to improve your credit score, your retirement contributions should be lower than if you were focused on that as your primary goal.
Further, when you checked your credit score, if it wasn’t as good as you expected, you may want to consider tabling your goal of buying a house until at least the later part of the year, if not next year, to allow time to focus on improving your credit.
As you start crafting your New Year’s resolution, be sure to include your finances in those resolutions. Take the simple steps of checking your credit score on Credit.com, reviewing your debt, bills and income, and setting your goals for the year.
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