Long after all of the holiday presents are unwrapped, many people are still unwrapping unwanted “gifts” in their mailbox: bills, bills and more bills.
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“A lot of people go into debt over the holiday season,” says Nicole Lapin, personal finance adviser and New York Times best-selling author. “I think it’s a great time in the new year to check in with your budget and give yourself an unfiltered financial selfie, if you will. You have to know exactly what you are dealing with in order to get it together.”
Lapin has three ways you can improve your finances in the new year:
Set a spending plan
Most experts agree that setting a budget is a key step to getting your finances in order. Lapin says she views a budget more like a spending plan. She breaks down her plan into the three Es: essentials, endgame and extras.
“70 percent of your overall budget should go toward the essentials, the basic stuff you need: the food, transportation, utilities and insurances,” Lapin says. “15 percent should go to the endgame; that’s your future self. Your savings account, your retirement account and your investment accounts. 15 percent should go to the extras. The morning latte is an example of what your extra could be. It could be a mani-pedi. It could be a cocktail. Set aside some of that extra money in your budget and then use tools to help you stay on track with your spending.”
Lapin says it’s very important to factor in the extras into your spending plan.
“A lot of financial experts will tell you to go on a really strict budget and cut out the morning latte and all of the small extra indulgences,” she says. “That is honestly not sustainable. I like to think of a spending plan like an eating plan because it allows you small indulgences which keep you on track to keep you from binging later on.”
Lapin suggests checking in on your spending plan once a quarter to make sure you are on track.
Did you know that certain monthly bills can be negotiated down to a lower rate? Think of the interest rate on your credit card. Also, consider what you pay for cable television or internet service. Lapin says some companies will throw you a bone for simply being a customer.
“It’s your hard-earned money, you might as well fight for it,” she says. “All of that stuff is negotiable. The worst thing they can say is no, so you might as well ask.”
Negotiating a lower bill may be easier than you think. Consumer Reports says 70 percent of people attempted to negotiate a better deal with their cable provider. Out of that group, 80 percent were able to get one or more perks, including price cuts.
Improve your credit score
Lapin says credit is our most important financial asset and improving your credit score should be a key goal for 2019.
“Your credit score is connected to the interest rates you get on your credit card, mortgage and your car loan,” she says. “It’s essentially your financial report card.”
Lapin says how you use your credit in 2019 will also be important. If you have credit cards you aren’t using, you shouldn’t cut them up.
“Keep them alive,” she says. “Make sure you put a recurring bill on them. You want to make sure you are charging a small amount and not maxing out the cards that you have available to you.”
When using credit cards, Lapin says the smart choice is to use one with rewards. Let’s say you are out with friends and you have a credit card that offers a bonus at restaurants or grocery stores. Volunteer to pick up the tab to get the rewards points the credit card offers. After the purchase, make sure your friends pay you back. Pay the balance in full each month. And most importantly: don’t forget to pay your bills on time.
“While I know it sounds obvious, it’s one of the biggest factors to acing your credit score in the new year,” she says.
Linda Bell joined FOX Business Network (FBN) in 2014 as an assignment editor. She is an award-winning writer of business and financial content. You can follow her on Twitter @lindanbell