Starting the year off right is important, especially when it comes to your finances. It may seem like a daunting undertaking, but there are quick and easy steps you can take now that can have a huge impact on your finances.
The ABC15 Smart Shopper Team spoke with Debra Radway, certified financial planner and lecturer from Arizona State University, about the things she says everyone can and should do now to improve their finances.
This is especially true after the holiday shopping season. According to nerdwallet.com29% of those who put holiday gifts on a credit card in 2020 were still paying off those balances in 2021. Additionally, the report states that 75% of shoppers in 2021 planned to use a credit card to pay for gifts, charging $620 on average.
“I don’t think most people realize the true cost of this debt,” Radway told us. “Basically, if you have $1,000 in credit card debt and you only make the minimum payment, it will take you 117 months to pay it off. And the interest you will pay is over $1,000. Debt is very expensive. You know, even if you get an item on sale, if you put it on your credit card and don’t pay that much back, that month, that item could end up costing you almost double what you have paid. for that.”
Radway suggests that people trying to pay off their credit card debt look at the interest rates for each card.
“Order them from highest interest rate to lowest interest rate, then start paying off the highest interest rate first. Work your way down credit cards,” Radway suggests. . She also adds, “Now sometimes people feel successful if they can just pay off a credit card and close it. So if you have rates between 20-18% and you have a small balance on One, you might be better off paying off that credit card and closing it or cutting it off from using it again, because it gives you a sense of accomplishment that you’re making progress.
It also goes improve your overall credit score. It can impact everything from your mortgage to your car payments.
“The difference between a mortgage payment if you have a credit score of 740 or higher, or a credit score of 640 could be hundreds of dollars, depending on the type of mortgage and the amount of the mortgage. Improving your credit score can make a big difference when you’re borrowing for a house or a car and realizing big savings,” Radway said.
While these two tips might be things you’ve heard before, Radway also told us where homeowners can find big savings right now: see if you have private mortgage insurance, or PMI. You may be able to remove this from your monthly note.
“Housing prices have risen so dramatically in the Valley over the past year,” Radway explained. “Perhaps you bought your house and didn’t put down 20% down payment when you bought it. If the price of your house has increased significantly, you should talk to your lender about the possibility remove private mortgage insurance. And private mortgage insurance could cost hundreds of dollars off your monthly mortgage payment. So removing it, having your home appraised, can mean huge savings.
She also strongly suggests that anyone who can, should contribute to their retirement or 401K. Radway told us how much people could earn in these savings accounts because some companies agree to pay a percentage of what their employees put into them.
“Indeed, you can give yourself a raise – if you don’t contribute to your 401k. And, if you start contributing, many employers will match a lot of your contribution. I researched a few companies like Amazon, Walmart. Walmart matches 6% of a 401,000 contribution, so it’s a way to give yourself a raise and prepare for retirement,” Radway said.
Many companies with pension funds have set up a website allowing employees to track their savings. There are also usually tools online to help you figure out when you want to retire and calculate how much you’ll need to save on each paycheck you earn to reach your target date.
Debra Radway is a Certified Financial Planner, Trustee and Investment Advisor and provides financial advice to clients approaching retirement. She is also currently a lecturer at ASU’s WP Carey School of Business.