It is great to re-evaluate your current financial situation and improvise your financial plans at the very start of a new year. Many of us set up New Year’s Resolutions before every new year. But some people do not believe in such things. 

As a result, they have to face a major financial crisis which may damage their financial situation pretty badly.

Let me tell you a short story about my friend Bruce and his financial journey, a few years back.

Bruce is about 42, living in Nevada City, California with his lovely wife Jenny and 3 kids, Will, Sally, and Jerry. Will is a teenager, Sally is about 11 years old, and Jerry is just about 6 months old now. Bruce worked full time in a printing company, and Jenny was a school teacher.

Bruce was having a mortgage on his house which he owns by 45% equity. He also owned a car but without any car loan. On the other hand, Jenny had the habit of using multiple credit cards and used them mainly for dining out at expensive restaurants.

Initially, they do not have any issue with the credit card bills as Bruce and Jenny both were working full-time. But after a few years, they decide to become parents again and Jerry was born. During her third pregnancy, Jenny was having a few health complications so she had to leave her job permanently. But she didn’t leave the bad habit of spending through credit cards. So, in the end, her credit card bills were too much for her to handle.

Meanwhile, their first child Will finished his high school studies and went to college. For that reason, Bruce took out a personal loan to fund his education. He did not want to put pressure on Will to carry the load of student loans. So, practically he was carrying mortgage payments, the new personal loan payment, and the credit card bills of her wife.

So far it was going a bit difficult for Bruce, but he was somehow managing the expenses with his salary. But by doing so he failed to contribute to the savings account for a couple of months.

But the time was bad for Bruce. Two weeks before Jerry was born, Bruce’s only car had an accident and needed serious repair work. Bruce used the money he saved for the hospital to meet this emergency requirement and later took out two payday loans.

Finally, he was drowning deep into debts (mortgage payments, credit card bills, personal loans, and the two payday loans). Furthermore, he doesn’t have any savings left to pay for any sudden expenses.

That situation was critical. So, without thinking of any other option Bruce opted for consolidating debts by using his existing home equity. He contacted his existing lender and took out a remortgage loan. As a result, he was able to pay off his credit card bills, pay off his personal loan, and all the payday loans. Now, he only has to take care of the mortgage loan payment each month. He saved from interest payments and reduced multiple payments every month. But he had to pay additional fees for remortgaging the loan.

If we closely review Bruce’s situation, it is clear that if he had planned his finances a bit earlier, he might have managed his finances in a much better way.

It doesn’t matter whether or not you have planned for your finances, but you have multiple options to improve your finances in the year 2020.

You may follow the below-given tips to improve your finances in this year 2020

1. Set Financial Goals

First important financial lesson – you should always set realistic financial goals. Without setting financial goals you can’t motivate yourself to get financial freedom in your life. Make sure your financial goals should be perfect and achievable for you.

You should separate your financial goals into two categories, short-term and long-term. Practically your short-term goals should be achieved within 6 months to 1 year. For long-term goals, you can have a longer time.

My friend Bruce didn’t have any savings for his long-term goal mortgage. That’s why he faced severe challenges to manage that secured debt.

2. Follow A Budget & Track Your Expenses

After considering Bruce’s experience, it is quite clear that spending without limitation can be devastating for your financial situation. If you don’t set up a budget and categorize costs limits for each category, you may overspend in everything. 

Tracking your expenses will give you the info on where your money is going and how much. This is what called a clear picture of financial health.

You may use a few financial apps to track your expenses.

After knowing your spending pattern, your next job is to reduce costs in every category especially in entertainment and luxuries. At the end of the month, you will save a good amount of money from your total monthly expenses.

Follow this process over a month and compare the current month’s savings with last month’s savings. The difference will put a smile on your face!

3. Pay Off Any Debts

Paying off outstanding debts can reduce a load of monthly payments from your shoulder. This will help you to save more from the monthly budget. So, it is wise to seek debt consolidation help from a non-profit credit counselling company. They will help you to set a repayment plan and achieve debt relief. Debt consolidation is also safe for your credit score.

You may also choose DIY debt consolidation methods. You may choose a balance transfer method to transfer all of your credit card debts and pay them later with no interest.

My friend Bruce should opt for this option to save on interest, but he chose the remortgage option. It is not good to convert your unsecured debts into a secured debt. But Bruce did the exact same thing. He put a risk on his house to pay off unsecured high-interest debts.

4. Opt For A Health Savings Account (HSA)

You might hope for getting good health and happiness for you and your family throughout the entire year. But being a human being, you may face sudden health hazards without any notice. 

Those unexpected healthcare costs may reach a level that you may find difficult to manage. So, without struggling to pay medical bills, you may open a Health Savings Account and keep you and your family safe. You must meet the IRS requirements for HSA eligibility.

5. Build An Emergency Fund

Do you have enough funds ready to cover up to $2,000 in an emergency requirement? Nope? Then you are also following the path of my friend Bruce. He also didn’t have a penny saved for repairing his car, remember?

Emergency funds are important for your overall financial health. In any sudden money requirements, your expenses can be covered by your emergency fund without hampering your finances. So, from the very first day of the year 2020, you should start saving in an emergency fund.

6. Try Investment Options

If you have a good amount of money in your account, you may use it to create more wealth. Invest your money in small and long-term investment plans and gain profit. Review and re-balance your investments as per your personal and economical situation. 

Make sure to choose investment plans that are suitable for your profile and investment goals.

7. Review Your Credit Score

Your credit score is the mirror of your financial situation. You should check your credit score online for free. Also, check your credit report free and check for errors and bad items listed there. 

You must keep your credit report clean to increase your creditworthiness and improve your credit score. A better credit score makes the creditors offer you lower interest rates on loans and credit cards.

8. Consult With A Financial Advisor (If Required)

If you can’t plan out how to improve your financial situation in 2020, then you may consult a financial planner or advisor who can help you with this issue. Planning is the most important step toward financial well-being and it’s important to review your investments, assets, debts, healthcare costs to make a solid financial plan. 

Different life events may also change the course of your financial situation. After discussing with a professional financial advisor, you chalk out your moves and proceed toward your financial goals.

It’s Your Turn! Join The Conversation!

What do you think? Every one of us is an expert at "living." Share your experience and insights in the comments box below! Your comment could help to inspire & change the lives of millions of Code of Living readers around the world!

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Patricia Sanders
Author

Patricia Sanders is a financial content writer. She is a regular contributor to debt consolidation care. She has been praised primarily for her effective financial tip enriched contents that anyone can follow easily. Her core passion is to provide information on how people can easily get debt consolidation to become debt-free. Due to that reason, she has earned her recognition and honour in the industry from the readers facing financial issues. Besides writing, she loves to travel and read books on various topics. 

  • Great points! I think getting on track with your finances starts with knowing where you are with your spending and creating an action plan. Thank you for your insight.

    • Everyone should set up financial goals, its important. Take help from a professional financial advisor so you don’t make any mistakes while making decisions.

  • Great advice and needed now more than ever. There’s no room for uncertainty when it comes to your money and having a plan can help with riding out difficult times.

  • Thanks, Patrica! Excellent financial tips. But the economics going to fall for covid 19. Please prepare content on this.

  • Wonderful, fail-safe tips! I consider myself a thrifty person but I realized I never set any financial goals for this year and beyond. I used to do that but then I migrated and was so focused on other things that I forgot to. Thanks for the reminder! This post is very helpful. 🙂

    • If you are having problems while setting up financial goals, then you should use some apps which can help you to track your spendings and all. Glad that it helped.

  • Great tips! I am currently working on paying off my debt! It’s a challenge, especially with everything going on in the world with COVID-19. Hoping things go back to normal soon so I can get back on track and continue paying off my debt.

    • Glad that you liked the tips! Yes, the situation is getting worse. Be safe and wishing you luck so you can get back to the track! Pay those debts as early as possible and lead a debt-free life.

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