How can you get your finances in better shape this year? David starts with three financial resolutions to make on this two-part series.
We don’t want to be too cliché but this is the time of the year when everyone assesses their lives and often make resolutions looking into the new year. What financial resolutions are worth adding to your list? David outlines three elements you’ll want to consider on the first episode of this two-part series.
The first one is also the most important one to do: find out your net worth. The first rule of getting to where you’re wanting to go is to know where you are. This applies when you’re navigating a map or setting financial goals. This also motivates you toward your financial goals. So grab a piece of paper and write out your assets with the corresponding dollar amounts. On the right-hand side, list your liabilities. Total both sides up, subtracting the liabilities from the assets to find your net worth. Over time, the goal is for your net worth to grow as you check in on this year after year. This is a super basic but super important step that provides you momentum toward your financial goals.
Next, pay down and hopefully pay off your credit card debt. If you have credit card debt, that’s like having termites in your house or rust on your card. There’s nearly a trillion dollars of credit card debt in America. The average credit card balance is over $5,500 with almost 41 percent of credit card holders carrying the balance from month to month. Generally speaking, you want to avoid carrying a balance. Instead, you want to live below your means. What about other types of debt? David talks about car debt and mortgage debt and explains how these may differ from credit card debt.
Make sure you establish an emergency fund that you can count on. This can take a number of different forms, but you want to have six months of expenses. This could be in a savings account, money market, a brokerage account, or even in a HELOC (home equity line of credit). This is to protect you from the unknowns that might come up like needing a surgery, losing your job, or even just needing new tires on your car. Having a cash reserve allows you to avoid putting these expenses on a credit card and stay out of debt.
How are you doing so far on these resolutions? Make sure to check out our next episode to hear the rest of the financial resolutions worth making in 2022!
Listen to the full episode or skip around to certain topics.
0:27 - What resolutions have David and Walter made?
4:55 - Find out your net worth.
13:08 - Pay off your credit card debt.
17:46 - Are other types of debt just as bad?
21:05 - Establish an emergency fund.
“If you see your net worth to go down in a given year, that’s not a reason for despair. But it is a reason to say, “What happened? Why? Am I okay with that?”
– David Dickens
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