There is so much you can do with your hard-earned cash, so what's the best way to reach your financial goals for 2018?
We spoke to JP Krahel, an assistant professor of accounting at Loyola University Maryland Sellinger School of Business, about the best money practices to help you stick to your financial resolutions.
Think of Yourself as a Bill
Add yourself to the list of bills you must pay each month, said Krahel. This requires discipline but he says the pay off will be worth it. "If you treat that pretty faithfully, by the end of the year you'll have a nice nest egg saved up for a rainy day or for retirement."
Paying Off Debt is Like Earning Interest
"When you pay off debt, you are essentially earning back the money that you would have been paying on interest if you held that debt off until later," said Krahel. "So if you're paying a credit card off that charges 14 or 15 percent interest or even 25, 26 percent, you're essentially earning that interest rate."
Create a Daily Budget
Creating a budget for your family helps keep everyone's spending on track but sticking to it is another matter. Krahel suggests you break it down into a daily budget, rather than a monthly one. Subtract your monthly expenses from your monthly income, and divide that number by 30. Keep track of when you save money each day, or when you go over the daily budget.
Raise Your Credit Limit
Krahel says if you want to improve your credit score, raise your credit limit. "One of the big ways that credit card companies determine your score is by seeing how much debt you have as a portion of how much debt you can have," Krahel said. "If I have a credit limit of $1,000 and a bill of $900, it looks like I'm up to my eyeballs in debt. But if I have that same $900 debt but my limit is $10,000, then I look a lot more comfortable. Its the same amount of debt but as a percentage it looks better."
Bonus: How to Prioritize Your Debts
Krahel says to focus on the bills with higher interest rates. "If I have two bills, one that's a small amount and high interest and one that's a big amount and low interest, go after the high interest first just because that's going to grow the most quickly," he said.
