By Kit Eberhardt
On the last day of the year, at the stroke of midnight, the mantra “New Year, New Me” becomes widely adopted. While most of us are guilty of subscribing to this four-word phrase year after year, the query arises, what makes the “New Me”? Are we working out five days a week and hiring a personal trainer to push us into peak physical condition? Are we practicing better mental health and finding inner peace? Or are we gearing up for greater financial prosperity and setting ourselves up for yearly success, continuously adding more green to our wallets? Whichever version of “New Year, New Me” you want to take on this year, consider your first choice to be “New Year, More Green.” Kick it into high gear this year with these tips on how to make 2023 your greenest year yet!
Create a Budget
Coming up with a budget and sticking to it might seem quite daunting. Reviewing your monthly, quarterly, or even your yearly finances can either bring a sigh of relief or feel like a slap in the face. If you have a budget and believe you stick to it, then perfect – you’re on the right track. If you are someone who does not have a budget or needs to reevaluate their current one, there’s no better time than the present.
First and foremost, you need to have an overall scope of what you are spending each month. There are dozens of ways to categorize your expenses; utility bills, credit card debt, student loans, personal loans, vacations, subscriptions, groceries, charities, etc. Pull your financial statements, analyze each month, and put each transaction in its corresponding category. Looking at each month, and your overall year, where can you cut back on spending? In what category are you spending the most? Do you have any additional funds to contribute to a savings account?
If you spend cash only and do not typically utilize a bank to make purchases, you can still create a budget and track your expenses. Keep your receipts each time you buy something, and add up the cost of each category at the end of the month. A good spending baseline can be seen after tracking for at least three months.
For the technology-savvy and convenience-seeking individuals, most banking institutions have created bank-branded budget snapshots for you to view on the go and in the moment. Other download utilities include Mint, YNAB (You Need A Budget), PocketGuard, Honeydue, Digit, etc.
Whether you follow financial gurus, use the 20/30/50 method, decide to only spend the cold hard cash in your wallet, or want to thrive off your color-coded excel sheet, through trial and error, it is up to you how you decide to maintain a personalized budget.
Keeping Up with Your Credit Score
“Do you know your credit score?” This question can make even the most financially sound person shake in their Gucci loafers. Surprisingly, many consumers do not understand their credit score and what factors can make or break it. What’s the big deal, you ask? Well, you need credit to purchase big-ticket items and be approved for a loan or credit card. Needless to say, it’s a piece of the financial puzzle that should be taken seriously.
There are three credit reporting agencies/bureaus in the U.S. that calculate what is called your FICO (the Fair Isaac Corporation) score. FICO collects information from your credit report from either of the three bureaus (TransUnion, Equifax, and Experian) and develops a credit score based on your credit report published by each agency. Being that there are three competing agencies, it is common for your credit reports and scores to differ by agency. Your score can range from 300 to 850 but can change over time based on how you utilize your credit. Financial institutions rate 300 as ‘very poor’ and 850 as ‘exceptional .’The current average score in the U.S. is 716, which is considered ‘good.’
So, what impacts your score? When a company is calculating your score from your credit report, the following are considered: current unpaid debt, the volume of credit applications submitted in your name, bill-paying history, availability of credit being currently used, number of loans you have, and what kind, length of time loan accounts have been opened and any debt sent to collections, foreclosure or bankruptcy and when.
To keep your credit score trending upward, it’s important to keep your credit usage to about 10% of your available limit, pay your bills on time, and limit the number of open debt accounts. If you’re working to rebuild or starting from scratch, consider applying for a secured credit card and using them responsibly by purchasing small items like gas or groceries. By utilizing a secure card and making your payments on time, you can easily see a boost in your score within several months. Track your score using your online banking profile, apps like Credit Karma, or by subscribing directly to one of the bureaus’ programs.
Invest in Real Estate
What’s the most expensive purchase you can make in your life but gain the most significant return? Property, of course! Real estate is one of the best ways to establish and sustain financial wealth. The act of purchasing property may feel like a complete emotional roller coaster, but it can leave you flying high with outstanding equity.
There are a few ways you can go about building your real estate portfolio. The first step is to decide what type of property you’re interested in purchasing. Single-family, multi-family, townhouse, condominium, or even land can all act as your jumping-off point. Second, find a realtor you trust. Developing a relationship with a realtor whom you trust to help educate and assist you in making a sound decision around real estate is paramount. Ask questions of each other and work together to find what you are looking for — this is your investment and your dollars being spent, and your realtor should take that seriously. Lastly, connect with a mortgage lender who can provide you with all the financial information required before taking the leap and making an offer to a seller. Your lender will be able to qualify you for a pre-approval amount based on your financial standing and be your sounding board when you have burning questions on property taxes, insurance, mortgage payment, interest rate, etc.
The last couple of years created a very interesting real estate market for both buyers and sellers. While we are now experiencing a time of increased cost of living, property owners can take solace in knowing their mortgage expense will not follow the inflation trend. Property taxes and utilities can increase in cost over time; however, your mortgage payment remains constant. When you are the renter of a property, you face the volatile game of increased rent payments or lousy landlords who, at a moment’s notice, can dictate your living situation. Why pay someone else to live in their home when you can pay yourself to live in your home?
If you are already a homeowner and are interested in getting into the investment game, second to your budget, consider purchase location. Where do you want to buy and later sell or lease? What area will give you the greatest return or provide a long-term lease investment? Get connected with your favorite realtor and discover up-and-coming neighborhoods, areas seeing an influx in relocations, and where economic development is on the rise. Let your Realtor and lending institution guide you on your path to assembling a robust real estate portfolio. Investment properties can provide you with the opportunity of generating a residual monthly income, which you can then allocate to other investments or simply add a little green to your wallet.
