Did you make any New Year’s resolutions this year?
Lots of people resolve to lose weight, quit bad habits like smoking and drinking, or save more money.
Those are all great ideas but in this article I’m going to focus strictly on improving your finances in the year ahead.
Setting money-minded goals and following through on them can have a powerful impact on your entire life. When you’re in control of your money you’ll be more confident and better prepared to weather any financial storm that comes your way.
Here are seven smart money moves that you should consider making this year.
1. Pay Down Your Debt
I’ve said it before and I’ll say it again: debt sucks.
When you have to devote a large chunk of your salary to high interest debt like credit cards it means you have less to pay towards your other goals.
And carrying a balance will set you off on a downward spiral of debt where you pay more and more toward finance charges while your balance grows instead of shrinking.
Being stuck in debt can cripple your spending power and limit your options. It can drain you of your confidence and negatively impact your health by causing sleepless nights, weight gain, or high blood pressure.
Related: 7 Signs Your Debt Is Out Of Control
If you have debt, now is the time to start paying it down. List out all your debts including the balances and interest rate for each. Organize them in order from the lowest current balance to the highest and start paying them down as quickly as you can.
Pay the minimum on each card and put everything else you can toward the card with the lowest balance. When you pay that one off, shift your focus to the next highest balance and put everything you can towards that one.
This method is called the debt snowball and it’s the one favored by Dave Ramsey and many other financial experts.
Related: Debt Snowball vs Debt Avalanche
2. Get a Side Hustle
I’m a firm believer that everyone should have a side hustle of some sort.
A good side hustle will diversify your income and make you less reliant on your regular salary. It will form a layer of protection in case you lose your job or suffer a reduced income.
Side hustles will also accelerate progress toward your goals. If you’re focused on paying down debt and you earn an extra $100 a month through a side gig that’s an extra $100 you can put towards debt payments.
If you’re saving up for something the money you earn through a side gig will help you reach your goal all the faster.
There are plenty of ways to make extra money so all you have to do it choose the one that is right for you.
3. Keep A Closer Eye On Your Credit Score
When was the last time you checked your credit report? Have you ever checked it?
These days identity thieves run rampant and no one’s personal information is secure. It’s more important than ever to monitor your credit report to look out for errors or fraudulent activity.
If there are errors on your credit report it will drag down your credit score and you could have trouble securing a loan if you need one. You might have trouble renting an apartment or renewing your cell phone contract. You could even have a hard time getting a job.
You will also end up paying higher interest rates on your car loan and higher car insurance premiums.
For all these reasons, you absolutely must keep a close eye on your credit. By law, you’re entitled to one free credit report per year from each of the three credit-reporting bureaus.
You can request your free credit reports completely free through AnnualCreditReport.com.
The website is a great resource and you should definitely take advantage of the free credit reports. The problem is a year is a long time and a lot can change in the meantime.
To keep yourself truly safe you need actual credit monitoring that will alert you to any suspicious activity with your account. The credit-reporting companies will offer this service for a hefty price tag but you can get the same thing for free with Credit Sesame.
I have a Credit Sesame account myself and I sleep easier knowing that my credit is being monitored real-time.
Plus, Credit Sesame provides your credit score for free, while you’d have to pay for that with the credit companies.
4. Build Up Your Emergency Fund
If there is one thing you can be certain of it is that life is full of uncertainty.
When the unexpected happens you can bet it usually comes with a hefty bill.
In just the last couple of years we’ve had a number of unplanned expenses including the water heater dying suddenly, Cate falling out of a tree and breaking her arm, and a freak wind storm ripping a bunch of tiles off the roof.
Oh, and this year’s doozy was the central air conditioning unit dying in the middle of a 95 degree heat wave. That one alone cost us about $5,000.
Life is full of financial emergencies like these, which is why it’s smart to establish an emergency fund to cover unexpected expenses or a sudden loss of income.
If you don’t have the cash set aside to cover these unforeseen expenses you’ll end up putting them on a credit card and that will create a whole new set of problems.
On the other hand, having a healthy emergency fund set aside will fill you with confidence and peace of mind.
Related: How To Build An Emergency Fund
How much should you have in your emergency fund?
Personally I like to keep at least three to six months on hand, but if you’re just starting out try to save up at least $1,000 to start. You can always increase it later.
5. Increase Your Retirement Contributions
Retirement may seem far off right now but time flies and before you know it you’ll be staring retirement in the face. Are you on target to retire comfortably or are you planning to rely on a wing and a prayer?
If your employer offers a 401(k) plan that’s a good place to start. Try to contribute at least as much as your employer will match if they offer that feature. If not, you’re turning down free money.
If you don’t have access to a 401(k) plan you can always open up a ROTH IRA for yourself. You don’t get an upfront tax break on ROTH contributions but if you follow the rules all of the interest and earnings will be tax free in retirement.
6. Adjust Your Tax Withholding If Needed
Years ago I used to receive enormous tax refunds all the time. I had way too much withheld from my paycheck and I would get between $3,000 and $5,000 back every year.
I loved getting a big fat refund because it was like found money. I could put it toward a family vacation or a home improvement project or even just paying down some debt.
But one I realized what those fat refund checks were costing me.
To receive a tax refund of $3,000 meant I was overpaying the IRS $400 every single month.
While I do like getting a nice sum of cash once a year as a tax refund, I could also use that extra $400 on any given month.
Why should I give the government an interest free loan of my money when I could put that money to better use throughout the year?
If you find yourself receiving excessively large tax refunds and you really need that money earlier in the year, you can lower the amount that is withheld from your paycheck by filing a new W4 form.
Ask your manager or HR department on how to make the change so you can keep more of your pay for yourself.
7. Shop Around For Savings On Regular Bills
Lots of personal finance experts suggest you save money by cutting out small indulgences like your morning latte or that delicious craft beer you love so much.
That’s solid advice but it is also incomplete.
You can often find bigger savings by attacking your recurring bills or big ticket items.
For example, let’s say you’re paying $150 per month for cable TV. If you ditch cable and switch to a combination of Netflix and Hulu you can cut your bill to about $20 per month.
And that’s not a one-time savings. You’ll be trimming your spending by $130 every single month.
Over the course of a year you’ll save $1,560!
Mike Collins has been working in the financial industry since 2002 and is a self-proclaimed money nerd. He’s written for numerous personal finance websites and been featured on sites such as MarketWatch, Fortune, and Business Insider. Mike created Wealthy Turtle to give readers the tools and knowledge to manage their money like a rock star.