Happy 2018! It’s that time of year where everyone is making resolutions, many of which involve getting in better physical shape. However, people should make sure their financial fitness is held in the same regard. With about 40% of purchases being preferred on credit cards, consumers should stay on top of their credit and make the most out of their plastic in the new year.
Find A Starting Point
Determining where to begin to gain complete control over your financial health is the hardest part. Pulling a budget out of thin air and sticking to it is ill-advised.
Instead, keep and check a list of all your expenses on your credit card over a short time, usually between one month and six weeks. By having this list, you can see any unnecessary purchases made that are avoidable in the future. Repeating this process monthly will help save money that can be used elsewhere.
Pay Off All Existing Debt
It might sound simple, however, Americans have racked up an average of over $16,000 in credit card debt per household. Carrying a balance can make it impossible to make the most out of a credit card. In addition, people who are paying just the “minimum due” on a credit card will pay more interest over time. With this in mind, it’s important to pay your balances off in full when possible.
The two basic strategies to pay off debt are the snowball and avalanche methods. Both methods require you to pay minimum payments each month on all of your debts, except for one. You’ll pay as much as you can on that one exception. The difference between the methods is the order in which you tackle your debts. With the snowball method, you will pay your debts off in order from the smallest balance to the largest. With the avalanche method, you’ll pay off the accounts in order from the highest interest rate to the lowest rate. This method will save you more money, since you’ll pay less in interest while you’re paying off the debt.
Use Your Credit Cards Responsibly
Credit cards can be one of your strongest assets if used correctly. It’s important to become familiar with the interest rates, limits, and any fees associated with your credit card. In addition, you should know your statement closing and due dates.
Only make purchases that allow you to pay your card off in full every month. High interest and late fees can add to your bill quickly, creating a debt pit that is difficult to get out of. If there is a reason you can’t pay off the credit card balance in full, pay as much as you can.
Take Advantage Of Your Rewards and Benefits
By signing up for a credit card, you receive exclusive cardmember benefits. In addition, you can usually earn rewards as you make purchases. Using a credit card responsibly and paying it off every month will allow you to use these benefits and accumulate rewards without any extra costs.
For example, the American Express Blue Cash Preferred Card comes with benefits such as discounts to member-only events, extended warranties, and even travel roadside assistance. In addition to these benefits, you receive 6% cash back on every dollar you spend at supermarkets, 3% at gas stations or department stores, and 1% on all other purchases. That’s free money back that you can put towards other expenses!
As we progress into the new year and you tackle your resolutions, remember to keep your financial health in mind just as you would your physical health. Finding a starting point and coming up with a plan can set up success for your whole year. After each month, take a step back and look at your previous month’s expenses and successes. This will allow you to continue to tweak your plan until you achieve financial health in 2018 and well into the future.