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How to be smarter with your money in the new year

Jess Peterson of Peterson Wealth Management.png

When it comes to money, the reality is that finances and credit are what makes the world go round for us here in the United States, because at the end of the day, we don't live in a bartering system, so proper cash flow and fund allocation equals power.

So if being smarter with your money, debt reduction and money management in general is on your list of resolutions for 2018, we've got some helpful tips to get you started.

(1) Keep an eye on your credit score. You can't buy really buy anything in the United States without good credit, so make sure to look through credit reports regularly for any errors or fraudulent activity. You can access a free credit report annually from each of the major credit reporting firms, Experian, TransUnion and Equifax. If you want more protection, you can sign up for credit monitoring, which will track your credit and keep you apprised of any dramatic changes.

(2) Try to pay your bills as soon as possible - preferably right after payday, and well before the due date. By doing so, you avoid late fees and you also avoid getting dinged on your credit score for being late.

(3) Create a budge and stick to it. By sticking to a budget, not only are you less likely to overspend, but it will also help you plan for future expenses.

(4) Invest, invest, invest. If you are financially able to invest some money, you should do so because you'll make more money that way than simply keeping your cash in a savings account. Although interest rates on savings accounts are going up, they're still too low to let your money just sit there. You can invest some of it in retirement plans, stocks or even property to maximize its potential.

(5) Pay down your debt. According to the Federal Reserve Bank of New York, consumer credit card debt has gone up by a whopping $61 billion in the past year alone, bringing the current total to $808 billion. Set a concrete goal for how much you want to pay down, and focus on paying down the debt with the highest rate of interest first.

(6) Diversify your credit cards. You may be missing out on offers and low interest rates if you're using the same card for regular purchases and the debt you carry over from month to month. There are reward cards that might be better suited for regular purchases while a card that comes with a zero annual percentage rate can add up big savings for larger balances. It will also help you track your spending.

(7) Build up an emergency fund. It always helps to have extra cash in case you're faced with unexpected unemployment or medical emergencies. Advisors recommend you initially strive for three to six months of expenses. Ultimately, you want to build that reserve to as much as 12 months to 18 months of living costs.

(8) Improve your credit score. You credit score can be as high as 850, but they typically range from 645-700. The higher your score the better your rates will be on mortgage loans, car loans and credit cards. You may be asking, "how can I improve my score?" See tip #2. Be sure to make payments on time. On time payments coupled with the length of your credit history inevitably getting longer with time can help improve your score by at least 20 points.

(9) Increase your financial literacy. The more you learn about money and personal finances the more likely you are to make smarter decisions. WalletHub provides an online quiz to show you where you need the most help. Your goal should be to get the score on the same quiz higher by 2019.

(10) Make more. This one may seem obvious, but it's a key way to improve your financial well-being. Consider looking for a better job this year, even if it means relocating to another city. You can also try to find ways to earn more in your current position, whether it's through a raise or promotion.

(11) Take care of your health. According to WalletHub, the average person spends just over $4,600 a year on healthcare. Taking care of your health now can help limit future healthcare costs. Another interesting thing to note is that WalletHub reports that people who tend to exercise more also have higher credit scores. How's that for some food for though?

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