Healthy Money Mindsets to Adopt in the New Year

Healthy Money Mindsets to Adopt in the New Year

The new year is the perfect time to reset goals and behaviors. While the focus for resolutions can often be on health and fitness, it’s important to remember there are other areas of your life that you can seek to improve. For example, becoming financially healthy is a smart goal with long-term benefits. To help you get started, we’ve outlined several healthy money mindsets you can adopt in the new year to improve your financial health.

Budget, Budget, Budget

One of the easiest ways to hold yourself accountable when creating new financial habits is to establish a realistic budget and stick to it. You can simply set it up in a spreadsheet or utilize any number of budgeting tools and apps, but putting all your financial obligations and income into one place, and ensuring you adhere to it, will be a total game changer for shaping your financial future. If you do only one thing this year to change your spending habits, it should be creating a budget.

The 50-30-20 rule is a great framework to help shape what an ideal budget looks like: 50% of your after-tax income on essentials, 30% for “fun” and discretionary spending, and 20% into savings of some kind. This ratio, while ideal, might not be achievable right away, but it’s a good goal to work toward to put yourself in a strong financial position.

We offer a free budgeting worksheet you can use to get started!

Contribute to Your 401(k)

People are often hesitant to set up contributions to their 401(k) (or similar) plans because they’re concerned about having less income on hand to address current financial needs. The advantage of setting up automatic contributions, however, is that you never see, and therefore, never miss, the dollars you’re contributing. Plus, because those contributions are deducted from your paycheck pre-tax, your taxable income is lower so the difference in your paycheck is often negligible. Your future self will thank you – even small contributions add up over time and have significant impact.

The bonus with employer-sponsored retirement plans is that the employer will often match the employee’s contribution to a certain point, so you’re potentially doubling your money in one fell swoop.

Identify Savings Opportunities

Once you’ve established a budget for yourself, it’s a good idea to find out if there are any areas in which you could cut back a little. Could you make coffee at home three times a week rather than going to the coffee shop? What about eating out two times less per month? Spending a lot on travel? Try signing up for a few travel website newsletters so you’re seeing special offers and savings opportunities. If you’ve recently subscribed to streaming services, consider canceling cable altogether.

You don’t have to make huge sacrifices for the savings to add up. Cutting back on your trips to the coffee shop alone could lead to big savings each year!

Pay Your Full Credit Card Balance Every Month

Credit cards are useful for establishing and maintaining great credit, as well as allowing you to take advantage of rewards and cash back offers. However, you want to make sure you’re not carrying a balance, if you can avoid it. The only way to pay no interest on credit card purchases is to pay the entire balance each billing cycle. No interest = more money in your pocket.

Also, payment history is the single most important factor contributing to your credit score. If you can’t pay your balance in full each month, remember to at least make the minimum payment. Even better: make a plan to pay off your credit card debt entirely.

Check Your Credit Report & Score Regularly

Keeping up with your credit report and your credit score are important actions you can take to ensure your credit history is strong and accurate. You can get your credit report for free each year from each of the three major credit reporting bureaus at www.AnnualCreditReport.com.

Once you get your credit report, you should give it a thorough read-through to ensure the information reflected in it is accurate. You have the option to dispute information or make corrections. Once you’ve confirmed all the information in your report is correct, it’s worthwhile to check it periodically to ensure that everything is accurate.

Your credit score is a part of your credit history, and it’s a number that’s used to evaluate your credit and lending worthiness, so it’s very important to maintain it at a level that’s as high as possible. Many factors contribute to changes in your credit score.

Your credit score isn’t included in your free credit reports; however, PSECU members can utilize our free credit score service* to receive monthly updates to their score. Members can also sign up for an account alert that will notify them when the updated score is available. Knowing your credit score is a key component of good financial health.

Don’t Open Store Credit Cards

When you’re at the register or in your cart while checking out online, that extra percentage of savings that store cards offer is enticing. Who can say, “no!” to an extra 15, 20, or 30% off your total purchase? YOU CAN.

Store cards save you money up front but often have high interest rates and only offer rewards for their specific brand. It’s just one more credit card balance you need to worry about paying off each month. The interest you’ll accrue can outweigh the initial savings you received when you signed up for the card. Also, every time you apply for credit, the card issuer pulls your credit report. These inquiries do have the potential to negatively affect your overall credit score.

We’re here to ensure our members achieve more. Visit our online learning center for opportunities to improve your financial health in the new year and all year long!

 

*PSECU is not a credit reporting agency. Members must have PSECU checking or a PSECU loan to be eligible for this service. Joint owners are not eligible.

The content provided in this publication is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Some products not offered by PSECU. PSECU does not endorse any third parties, including, but not limited to, referenced individuals, companies, organizations, products, blogs, or websites. PSECU does not warrant any advice provided by third parties. PSECU does not guarantee the accuracy or completeness of the information provided by third parties. PSECU recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.