How to Improve Your Financial Health in the New Year 

11.15.2022 | Category: Article

Getting healthy in the new year doesn't have to stop with your diet and nutrition. Being financially healthy is just as important as being physically, mentally, and emotionally healthy.

In fact, studies show that being financially secure can help ease mental and emotional distress, as well as prevent physical illness. This should come as no surprise as having a financially sound savings can help you prepare for emergencies, like health issues or home repairs, and alleviate the stress that comes with paying for unexpected purchases.

So, just as you would train to meet your physical fitness goals, it's important to understand your full financial picture before jumping in and make a plan.

     1. Assess your savings and spending habits

Just like taking inventory of your fridge and snack cabinets, when getting financially healthy, it's important to take stock of how you save and what you spend your money on. Are there expenditures you could cut down or out? Are there better ways to help your budget go the distance? 

Today it’s easier than ever to use online banking and mobile apps to track your financial habits. Could you be spending less on non-essential items to get closer to that big purchase you’ve been eyeing? An app can help you track those trends and see where you can trim your spending. 

In addition, it’s smart to have at least three-months salary saved for an emergency. And if there’s anything the recent pandemic and inflation has taught consumers, it’s that at least six-months of savings can be much beneficial when dealing in times of distress.

Evaluate whether you have enough money to get you through an emergency and if there are habits you could curtail to help save some money in your budget. An emergency is much easier to pay for if you’re not extending your credit or having to sacrifice your retirement or investments. 

     2. Check and know your credit score

Each of the three major credit bureaus, Experian™, Equifax®, and TransUnion®, are required to provide a free copy of your credit report at least once a year for free under the Fair Credit Reporting Act (FCRA). Consumers can go to AnnualCreditReport.com to check the information included in your credit report and for a limited time, credit users can access their credit report weekly. 

Your credit score is a numerical calculation based on your payment habits, utilization rate, credit history, inquiries, and your credit mix. Each of these are weighted a little differently with the most important factors being how often you pay on time and how much of your available credit you use. 

If you have a high credit utilization ratio, make a plan to pay down your debts so that you can avoid paying interest. This will also help increase your credit score and help you qualify for better credit card and lending conditions. 

Many lenders, including credit card companies and banking institutions, also provide their consumers with a free credit score. You can often request to receive a copy of your credit report along with your credit score when you apply for credit as well.

      3. Set goals that help you stretch your dollar further

Similar to training for a race or competition, you're going to want to push yourself out of your comfort zone. When getting financially fit, you'll want to be realistic about setting your goals while also stretching yourself. 

If after assessing your savings, spending, and credit habits you realize you could be a little more aggressive toward meeting your goals, you should reach for them. 

This is especially true if you're looking to make a big lifestyle change like buying a home, paying for college or planning for retirement. It’s never too early to start planning for life’s big goals and every little step cunts toward the finish lines.

Whether your New Year's resolution is to pay down debt, or make a big purchase, getting financially fit is an important first step toward meeting your goals. 

If buying a new home is one of your New Year's resolutions, contact Mutual of Omaha. Our loan specialists can walk you through your financial options to help you make a plan for making your New Year's resolutions a reality.