With Valentine’s Day just a couple of weeks away, many people will soon find themselves scrambling for last-minute gifts for their loved ones. It’s hard to believe that it was just a month ago we started our New Year’s resolutions. Hopefully you are still on track to achieve those resolutions, but I think it’s fair to say that many people have either ignored, forgotten, or given up on them. If this applies to you, I’m here to tell you that it’s not too late to get back on track; there is plenty of 2023 left for you to accomplish your goals. If your New Year’s resolutions happened to include improving your finances, then now is a great time to refocus your energy and start accomplishing them. Below are some ways in which you can show your money some love this Valentine’s Day:
Eliminate High-Interest-Rate Debt
The average credit card interest rate in the 4th quarter of 2022 was 19.07%! That’s right; if you carry a balance on your credit card, you are paying exorbitant interest. Now is a great time to implement a plan to eliminate your high-interest-rate debt as much as possible over the course of the year. You’ll want to be sure you’re paying more than the minimum payment each month because each extra dollar you pay goes towards reducing the principal balance. This will save you a lot of money (in terms of interest) in the long run. Other promising strategies include refinancing your credit card balance into a personal loan, which may carry a lower interest rate, or performing a balance transfer to another credit card. Many credit card companies offer an introductory rate of 0% interest for a certain period (i.e., 3 months, 6 months, 12 months, etc.) on balance transfers. This is great because, during the introductory period, 100% of your payments will go towards reducing the balance! Remember, read the fine print because the new credit card company will assess a fee on a balance transfer. In addition, interest may also be assessed if you don’t pay off the balance before the introductory rate expires. Not only will you save money by eliminating the debt, you’ll also free up some monthly cash flow that can be redirected to your other financial goals.
Build Your Emergency Fund
An emergency fund is the foundation for a successful financial plan, and something everybody should have. While the textbook says you should have 3-6 months of emergency savings, every situation is different, and the guidelines should just be a starting point. For example, a family of five with one working spouse may need to carry more than six months of living expenses due to the number of people relying on the working spouse’s income. Things may be different for a married couple with no children. In this situation, they may be able to get by with a smaller amount in their cash in reserve. As we can see, there’s no magic number that can be applied across the board. Each and every family has their own set of unique circumstances that will call for a different level of emergency savings.
Boost Your Retirement Savings
Did you get a raise or bonus at work? Did you eliminate your high-interest-rate debt and now have extra disposable monthly income? If so, congratulations! Now all you must do is to decide on what you would like to do with this extra money. While you can certainly spend the extra money, the more financially responsible thing to do would be to apply all or a portion of the money towards your retirement savings. This can include increasing the contributions to your company-sponsored retirement plan, making a Traditional IRA or Roth IRA contribution, or invest the extra money in a brokerage account. These strategies will go a long way in helping you achieve your retirement goals. I know these strategies may not seem fun and exciting, but believe me, you’ll thank yourself later.
One of the best things that you can do for your money and yourself is to prepare a comprehensive financial plan through a qualified financial professional. In fact, a financial plan is the preferred approach if you would like to address any of the items discussed above. A financial plan will provide you with the strategies you will need to pay off your debt, building an emergency fund, saving for retirement, determining which accounts are best for retirement savings, and how to utilize those accounts in retirement on a tax-efficient basis. Coordinating and aligning your entire financial life with your goals and objectives at one time will clarify your financial situation and put you on the best path forward to accomplishing your goals especially when you show your finances some love this Valentine’s Day. Contact Zynergy Retirement Planners today for more information.