1. Build an emergency fund
No matter your age or income level, building an emergency fund should be your chief financial goal if yours is not already fully loaded. Without a decent sum of money tucked away in a
savings account , you'll risk racking up loads of debt the next time a major unplanned bill lands in your lap, or you encounter a situation where you lose your income for a period of time (say, because you get hurt, fall ill, or get laid off). Your emergency fund should contain enough money to cover three to six months of essential living expenses, so if you're currently sitting on less than that, pledge to do better.
2. Get on a budget
We just talked about the importance of building emergency savings, and if you want to know how you'll eke out the extra money, the answer could boil down to budgeting. By following a budget, you'll get a better sense of what your spending categories look like, and you'll be able to make smart choices if you need to cut back. Best of all, setting up a budget is easy. Just go through your bank and credit card statements to see what your various bills cost you on average, and then list them on a spreadsheet so you have the option to tweak those numbers on screen and see what cutting back in different places might do for you.
3. Shed your credit card debt
If you're carrying credit card debt , you're no doubt aware that the longer you hang onto it, the more interest you'll accrue. That's wasted money that you're giving away to your credit card companies. If you've been doing so for quite a while, it's time to break the cycle. A good way to do this is to examine your budget, identify some expenses to cut back on, and use your freed-up cash to pay down your credit cards until you're finally in the clear. Getting a second job to boost your income also works in this regard, especially if you don't wind up getting a raise in the new year.
4. Make some extra payments toward your student debt
Unlike credit card debt, which is pretty much the least healthy kind of debt to have, student loans , when paid on time, can actually help boost your credit. But that doesn't mean they're not a drag to deal with. If you're still saddled with student debt, it may not be realistic to shake it completely in the course of 2020. But what you
can do is aim to make a few extra payments to get rid of those loans sooner
-- especially if you took out private loans, which tend to charge higher interest than federal loans.As you sit down to map out your financial objectives for the new year, try not to focus on the sacrifices you'll need to make to achieve them. Instead, focus on what you stand to gain.
-- financial security, a better grasp on your expenses, and the peace of mind that comes with carrying less debt than you did before.
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