SYRACUSE — Pick up your chin. The fact that you’re not even through January and have already broken your New Year’s resolution shouldn’t upset you. In fact, you’re not alone. Nearly 25 percent of people who made a resolution have already abandoned it. By June, that number will exceed more than 50 percent.1
For those who fail to keep their resolutions, the primary reason is common. Your goal was likely unrealistic and required too much change. For example, losing 20 pounds is a large number and doesn’t offer an action plan. Going to the gym three times a week for 30 minutes a session is more concrete and will yield positive results. So reset your expectations and recommit to achieving a new goal. Even if you can’t improve your fitness, maintaining it can be equally important and beneficial to your health.
The same is true of your financial health. Most of us can’t dig ourselves out of debt in a year’s time, let alone achieve our retirement goals. However, that doesn’t mean we can’t make significant progress.
Stop and reflect on that for a moment—not taking a step backward can be more important than a step forward. This is particularly true when it comes to your finances.
Assess your financial health
Are you currently living debt free? Have you recently splurged on a vacation or holiday gifts for loved ones? Is your retirement on track? What about your monthly expenses . . are you keeping up?
Financial health doesn’t necessarily mean you live debt free. Debt is normal as long as it is manageable and you maintain a low debt-to-income ratio. This refers to the percentage of debt (e.g., your total monthly loan payments) to your monthly income before taxes. Your debt-to-income ratio should be less than 40 percent.
Regardless of whether your debt-to-income ratio is above or below that 40 percent threshold, your minimum goal for 2016 should be to not let it climb any higher. Better yet, shoot to bring it down a few points by doing a few of the following:
- Review your spending habits. Focus on what you buy because you want it versus what you buy because you need it. And consider how often you use credit to buy the extras and whether or not you should reserve credit cards for major, significant purchases you can pay off promptly.
- Stick to your budget. Budgeting for food, clothing, entertainment and other extras helps you understand where you allocate your income. If you use online and mobile banking tools, checking your account balances and transactions is that much easier.
- Control credit card debt. Come up with a debt elimination plan. One strategy is to tackle high interest cards first. An alternative approach that can help you feel like you are making quicker progress is to attack lower balance cards first. As a rule of thumb. Once a card is paid off, apply that payment amount to the next card. As each balance gets paid in full, the amount of money available to pay of the next card increases. Finally, once you get your credit card account balances under control, pick one card to cover unexpected necessary expenses and pay cash or use your debit card for the rest.
- Review your credit report. You are entitled to one free report a year from each of the three major credit-reporting agencies—Equifax, Transunion and Experian. Check for and fix discrepancies. Inaccurate information can affect your credit rating.
- Contribute to savings. Commit even just a small percentage of your paycheck to your savings account. Automate transfers so you don’t have to think about it.
- Build an emergency fund. This should be a priority. The quickest way to derail financial progress is to get hit with a large, unexpected expense you are not prepared to pay. Your emergency fund should be, at minimum, 3 to 6 months of your living expenses.
- Adjust with life changes. If you are considering changing careers, buying a home, having a baby or even getting closer to retirement, revisit your financial plan and long-term goals with a financial planner. In particular, review your insurance coverage, retirement plan, will and estate plan.
continued — Just as with physical fitness, there are different levels of financial fitness. While it’s always important to have your big picture goal in mind, it is equally important to understand that it is the little battles you win that make it possible. So don’t be overwhelmed by this list. You don’t have to do it all. Simply understanding your financial situation better is an accomplishment, and checking off one or two of the things on this list will help improve your overall financial health. At the end of the year—resolution or not—you’ll be happy you did.
- Mona Chalabi, “How Fast You’ll Abandon Your New Year’s Resolutions,” FiveThirtyEightLife, Jan. 1, 2015.
Steve Fournier is president of KeyBank’s Central New York Market. He may be reached at either 315-470-5096 or [email protected] material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice. © KeyCorp 2016. KeyBank is Member FDIC.
Protect your identity
Identity theft is a crime where an imposter steals key pieces of personal information, such as your full name or social security number, to commit fraud. Once this information has been obtained it can be used to fraudulently apply for credit, file taxes or get medical services, all of which can damage your credit status and cost you time and money to resolve.
This is why, when it comes to maintaining good financial health, protecting your identity is very important. And it can be as simple as monitoring your financial and online accounts while taking some easy steps to cover your financial track.
Here are some basic steps to take to help protect your identity and make you a much harder target for fraud and cybercrime:
- Review your monthly statements for suspicious activity.
- Check your credit report every few months to spot fraudulently opened accounts under your name.
- Use only secure websites when submitting personal or financial information online. The URL will begin with https on secure sites.
- Be wary of opening suspicious e-mails. If the email looks suspicious don’t click on any attachments.
- Change your account passwords a few times a year.
- Make a credit card your primary spending vehicle and only sign for debit card purchases (rather than entering your PIN). This will give you the protection of fraud liability benefits.
- Shred sensitive financial documents such as receipts, credit card offers, account statements and expired credit cards before disposing of them.
- Avoid using your social security number whenever possible, and don’t carry it with you in a wallet or purse.
- Do not respond to unsolicited requests for personal information via phone, mail or online.
- Following these suggestions will help you protect your identity and ensure that you remain in strong financial health.
If you do become a victim of identity theft, instantly report it and put a fraud alert on your credit report. This notifies lenders and credit agencies to take extra steps to verify your identity during the application process. Also contact your bank and all of your credit card companies and file a police report. If your social security number was compromised, contact the Social Security Administration and Internal Revenue Service. For more information, you can visit the Federal Trade Commission website at www.consumer.ftc.gov.
