How to Clean Up Your Finances Before the New Year

Budgeting is critical, especially when shopping for holiday gifts. Take the time to examine your budget by detailing everything you spend money on each month, from gas to dining out. You’ll see how much you actually need to have on hand each month and what is left over for saving or spending.

With your detailed budget in hand, you’ll also be able to see what you are spending money on unnecessarily. Do you really need a newspaper or magazine subscription? Do you need those extra cable channels? How much do you spend on dining out? There are bound to be a few things you can eliminate in order to wind up with extra cash and fewer bills.

If you have extra income each month, you may want to start putting a little more towards paying off any debts, such as credit card bills, medical bills and car loans. The faster you get those paid off, the less you will have to pay in interest. Better yet, you’ll eventually free up even more cash each month when you eliminate a payment.

If you can’t pay off your credit cards that quickly, consider transferring the balances to a credit card with a lower interest rate. This will enable you to pay them off more quickly. You might also call up your credit card company and see if they can offer you a lower interest rate than the one you currently have.

One key to lower your interest rates is raising your credit score. Credit card companies use credit scores to determine your interest rate, so the higher your score, the lower your interest rate. Here are a few ways to raise your credit score quickly:

• Pay off your debts. The amount of debt you carry directly effects your credit score, so the less debt you have, the higher your credit score could potentially be.
• Get more credit. The more available credit you have, the higher your credit score will be.
• Remove negative items. You can dispute negative items on your credit report directly via the credit report bureaus.
• Hire some help. The best credit repair companies can help you dispute negative items on your credit report, if you don’t feel comfortable doing it yourself.

Finally, try to save a little bit each month. You can do this by setting monthly and yearly goals. You might consider setting up a separate savings account where you can have small amounts of your income directly deposited so you automatically save.

Take the time to rethink how you spend your money and follow some of the tips mentioned above, and you are sure to improve your finances for the New Year.