It's that time of year again: the time to buckle down and - for real, this time - conquer any credit conundrums plaguing your personal finances. No matter the quality of your credit score, there is always room for improvement. Once the new year hits, dedicate yourself to a future of great credit and great financial rewards. Here's how.
If you have bad credit
Work to eliminate credit card debt. Depending on the amount of credit card debt you have, this may take more than a year. But, like a healthy diet, a slow and steady lifestyle change is the best way to overcome poor spending habits. January 1st marks the first day of a new, healthier credit history. How:
- Start paying more than your minimum balance every month. Even just 25 cents a day (under 8 dollars a month) in addition to any minimum payments can slice years and lots of dollars off your total payments.
- Cut down on your credit card spending. Leave the plastic at home three days a week and use only cash or debit.
- Create one new spending rule. It can be as simple as consulting a partner or friend before buying anything over $100, or vowing to not open a tab on nights out with your friends.
If you have no credit
Start building! Get a credit card and start using it wisely. Work towards building a strong, secure, and smart spending plan and develop great credit from the get go. Choose from the best credit cards for college students (if applicable), or just one with some awesome incentives for making payments on time, and enjoy the beginnings of a great relationship with your creditor! How:
- Always make payments in full and on time.
- Don't spend money you know you don't have. The point of a credit card is not that you'll finally be able to go on that tropical vacation.
- Maintain your balance below your credit limit. The better you do at this, the more your credit limit will increase over time.
If you have average credit
Dedicate the year to achieving good credit. The good news: you are far above "bad credit" and don't suffer by paying the terribly high fees attached to bad credit credit cards. The bad news: your credit may not be good enough to relish the rewards of a good credit credit card. That is about to change. With an average credit credit card you can experience some perks like cash back and no annual fees while at the same time improving your credit with smart spending. How:
- Find the card that is right for you. What do you want most out of your credit card? No fees? Rewards? Pick wisely.
- Read the fine print. Make sure the card you want doesn't hike up its fees after a certain grace period so you don't get stuck with a credit card you don't want or can't afford.
If you have good credit
Revamp your retirement savings and IRA savings accounts. Keep up your great credit habits. While you're at it, go ahead and take a look at your 401(k) and/or IRA plans. Can you make any improvements or changes that will help improve your future retirement? (The answer is probably yes.) How:
- Do you have a 401(k) or IRA? If not, that is step one come January 1.
- If you do, are you contributing the maximum amount each year? If you aren't, consider re-evaluating your monthly or yearly additions to the accounts.
- If you have any accounts through your employer, discuss some options with your company's Human Resources representative and see what improvements you can make.
If you have excellent credit
Make those little tweaks that make a big difference I hope you are taking advantage of all the rewards and perks great credit credit card users can obtain. Rewards, incentives, interest rates: these should be the best they can be. But, of course, there is always room for improvement. What tiny tweaks can you make to even further your financial stability? How:
- Slowly increase your savings. Everyone has a different savings goal: three months salary, six months worth of living expenses, one year of total financial support for you and your family. Whatever your goal is, increase it and start contributing slowly.
- Think outside your credit. You've got that covered already, so what other financial security items can you work to create or improve? 401(k), insurance, a will, even your taxes could use a fresh eye and a higher spot on your priority list come 2011.
Wishing you all the best in the New Year!
