Reflecting on the Best Financial Year 2018

The economy and all measures of financial performance–real estate, the stock market, employment, wages–had an incredible 2017. Hopefully, you got a little piece of that success.

Today, I want to help you position yourself for your best financial year ever in 2018. This year is expected and is already showing signs of being at least as strong as 2017.

Here’s a simple plan to cash in on 2018.

Check your credit

Your credit report is an incredibly valuable tool. It’s a scorecard on how you’re managing your credit, but it’s also a comprehensive picture of your total debt picture. This snapshot should be the foundation of your 2018 planning.

First step: Get a copy of your credit report and score. If you don’t already have a copy, get it free from Credit Sesame.

With your credit report in hand you should formulate two essential goals:

• What credit score should I aspire to? Be realistic about this goal. Here are the critical breakpoints for lenders and insurers to ensure that you are getting the lowest rates and best deal: 580, 620, 680, 700, 720+. Depending where your current credit score is, pick the next tier and work towards it. Then continue to level up. Read about the specific steps in this article about improving your credit score.
• How much debt do I want to pay down? Paying every bill in full and on time is the top contributing factor to a high credit score. However, reducing your debt and lowering your credit utilization is a close second. The best way to aggressively pay down debt is to use what is often called the debt snowball.

Get on, or back on, a budget

Every strategy needs a plan. Creating a budget is that plan. Then you must commit to sticking to it. Following that budget is your best chance for financial success.

It’s not that hard, but you have to do the work.

In its purest form, it is nothing more than a pen and paper. On one side of your paper, you list your monthly take-home pay. On the other side, list all of your expenses. These expenses include big things like your rent or mortgage and your car but don’t forget all of the little things that secretly eat away at your cash–unplanned browsing and buying at Walmart, Target, Kohl’s, Amazon.com, and Starbucks. Once you have this initial picture, it’s time to find a little more margin between your income and expenses.

Now for the secret.

For most of us, it’s hard to increase our income significantly but don’t rule it out. We’ll talk about some strategies on that front in a second. However, realistically we can make the most gains by being more mindful and altering our spending behavior.

Here’s a great article on how to start saving more money, even if you’re not a saver at heart.

Increase your earnings potential

Opportunities to increase income is probably one of the most neglected aspects of financial planning. Many assume that their job is their job and their pay is their pay. But, all of us have the potential to increase our earnings potential if we put a concerted effort into growing our value to employers and customers.

The fastest way to add value is taking the initiative to learn and contribute more to activities that generate revenue for your employer or your own business. Here are some ideas on how to increase your income without even looking for a new job.

Crush your debt

Debt can put a damper on even the best economies and financial windfalls. If you want to grow your net worth and long-term financial well-being, you need to eradicate your debt.

Here are just a few things that you can do to accelerate paying off debt:

1. Create a budget and stick to your budget
2. Look for savings that will give you extra cash to pay more than minimum balances
3. Review all of your obligations and target the most expensive (highest interest rates) and smallest debts first. Attacking your debt in this way will increase your available cash and in turn, give you more to apply against other obligations–the debt snowball strategy we mentioned previously.
4. Take advantage of balance transfers (warning: use with extreme caution) to use zero-interest incentive periods to stop the accumulation of additional interest charges. Beware! This only works if you stop using and adding to your credit card debt.
5. Halt all credit card spending. Putting a freeze on your credit card spending is the key to success. Remove these cards from your wallet and start using cash. When it’s gone–stop spending.
6. Put any additional work bonuses, tax returns, or other extra income straight into savings or debt. Make sure you’re not tempted to spend that. You should only treat yourself as you check off goals towards your financial success.

Follow each step in this 6 part plan, and you’ll be amazed at how fast your debt melts away.

Don’t forget to have a little fun

Make sure that you have a little fun along your journey. This is probably as important as any other advice in this article.

Financial success will bring its rewards, but intentionally programming in rewards can make progress more tangible. Like a successful diet, you have to build in some “cheat days” to reward yourself as you hit your goals.

Personally, I love to travel so this is the kind of reward I would program into my plan: How to Start a Travel Fund to Pay for Your Wanderlust.

What are you planning for your finances in 2018? Share your ideas or questions with me on Twitter @billrice.

Photo by Nadine Shaabana on Unsplash