3 Smart Money Guide for New Learners Who Should Consider Making in 2023
We have all had our own fair share of the financial struggles in 2022. The pound fell to a 31-year low against the US dollar, pushed down by the market jitters surrounding Brexit. Similarly, the dollar fell to a three-week low against a basket of major currencies after U.S. inflation and unemployment data failed to reverse a downtrend.
Even as the markets continue to record unstable figures, so do our own financial goals. Year-in year-out we are ever making new resolutions revolving around money. We all come up with resolutions that we don’t even realize they are just a repetition of what we have in the past planned to do. And the result? Well, we end up being caught in money struggles and unforgiving debt jaws.
But that shouldn’t be the case in 2017. Let this be a year when you decide to make a major jump from your past mistakes. Sit down and strategies on what you can do to overcome the problem. This article takes you through 3 smart money moves you can make in 2017.
1. Pay off that Credit Card Debt
Do you have a credit card debt that seems never to end? Well, 2017 is the year to tell it R.I.P. High-interest-rate credit card debt can seriously hold you back financially. The higher the balance on your credit cards, the less you are likely to plan for the future.
Consider this scenario: your credit card debt is $5,000 with a 16 per cent interest. That will roughly cost you $800 per annum to pay off just the interest. And even if you were to search for the least interest rate possible, you can get a minimum of 12%.
In simpler terms, investing the $5,000 rather than paying off the high-interest debt will see you lose more money, about $200 each year.
Thus, your top one priority in 2017 should be to pay down any high-interest credit card debt you may have. Doing so will see you hit two birds with a single stone: get financial security and up your credit card score.
2. Increase Your Credit Card Score
As SubscriberWise CEO David Howe proved, a perfect 850 FICO score is indeed possible. However, it isn’t necessary to strive for perfection when it comes to credit. As Howe said in a 2014 interview, a perfect score requires a “perfect storm” of credit strategy and life situations, which may not be possible or practical for you to achieve.
It is an awesome idea to maximize your credit card score. With a high credit score, you could save a huge amount of time the next time you make a major purchase. And what’s more, increasing this is a continuous journey that involves living by a set of rules.
- Pay bills on time
- If you have missed payments, get current and stay current
- Be aware that paying off a collection account will not remove it from your credit report
- If you are having trouble making ends meet, contact your creditors or see a legitimate credit counsellor
- Keep balances low on credit cards and other “revolving credit”
- Don’t close unused credit cards as a short-term strategy to raise your scores
- Don’t open a number of new credit cards that you don’t need, just to increase your available credit
3. Open an IRA, Then Max It Out
An Individual Retirement Account (IRA) is a type of savings account that is designed to help you save for retirement. It offers many tax advantages. If you are yet to open such then 2017 would be the perfect time to get started! Do not live in the comfort thought that you already have a retirement plan at work.
Basically, we have two types of IRA’s: traditional and Roth. These two are greatly differentiated by their tax treatment.
Traditional IRAs are “pre-tax” retirement accounts, which means your contributions may be tax-deductible (depending on your income), but your eventual withdrawals will be treated as taxable income.
On the other hand, Roth IRAs are “after-tax” retirement accounts. Contributions are not deductible, but qualifying withdrawals will be 100% tax-free.
Traditional IRA blocks you from withdrawing the saved funds until you turn 59 years old. If you were to choose to break this rule, then be ready for a penalty in terms of income tax on the withdrawn amount. You can withdraw the Roth IRA contributions at any time you wish. Furthermore, while traditional IRAs have required minimum distributions once you reach age 70-1/2, Roth IRAs do not. In order to contribute directly to a Roth IRA, you need to meet certain income restrictions.
Once you have contributed to the IRA, the money will be invested in bonds, stocks or mutual funds.
Also See : Step by Step Guide to Getting Out of Debt