5 Tips to Get Your Financial Life Ready for the New Year (Part 1)

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Personal Finance in 2011: Get Yourself Ready!

The end of each year brings a time for reflection and renewal, and this is especially valuable when it comes to personal finance. As the year 2010 comes to a close, are you better off financially than you were on January 1? What would you like to do differently so your finances are in better shape at the end of 2011?

There are many things you can do by the end of the year to improve your financial position for 2011, including:

Check your credit score.

Your credit score helps determine whether you qualify for a home loan, auto loan, student loan or credit card, and it determines how much interest you pay whenever you borrow money. In other words, it serves as a kind of overall indicator of your financial trustworthiness. If your credit score is too low, it can make it difficult for you to get a job or rent an apartment. There can also be hidden problems in your credit history that you don’t know about until you check. So don’t go into 2011 without knowing the score – your credit score, that is.

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[Check Your Credit: Don't Guess. Know.® Get your free credit report and score. No credit card required.

Monitor your debt.

How much money do you owe, and to whom? How much is left on your mortgage, your car loan, your student loans? Are you carrying a balance on your credit cards, and if so, how much is it costing you? These are some personal finance questions that you need to ask yourself.

Debt can be expensive and unpleasant, but it’s even worse if you don’t know how much you owe. Don’t start the new year without finding out the full story of your debts, and making sure you’re on track to pay them off. To find out exactly what debts you owe, you can check your credit report or look over each of your credit card and loan statements.

Can you prepare to make extra debt payments during 2011? Even one extra mortgage payment per year could save you thousands of dollars in interest over the life of the loan. Can you transfer your credit card balances onto a lower-interest card? If not, can you make a plan to pay off your highest-interest credit card first? Every month that you carry a balance on a credit card, you’re borrowing from your future.

Check your savings.

Ideally, you should have a few pots of money that contain your savings – an emergency fund, retirement savings, savings for your children’s future education (if you have kids, and if you are choosing to save for college), and a short-term savings fund for certain goals like vacation or “fun money.”

How was 2010 for your financial goals? Are you closer to or farther from your goals? What can you do in 2011 to make it a better year? Can you boost your savings? Even an extra $50 a month adds up to $600 a year. Can you set up an automatic savings plan to put some money into savings from each paycheck? You might even discover that you have enough money in savings for now – would you be better off paying down debts instead of putting more money into a low-interest bank account? Paying down high-interest debt can be just as good (or better) than savings. If you have a decent emergency fund (six months of after-tax earnings), but are paying interest on credit cards, you’re probably better off forgoing extra savings until your credit card debt is paid off.

These are just three ways you can prepare your finances for the new year. Watch for more financial planning tips in part two of this article.

[Check Your Credit: Don’t Guess. Know.® Get your free credit report and score. No credit card required.

For more tips and tools to help you prepare your finances for 2011, visit Quizzle.com, where you can learn how to whip your credit into shape and get out of debt faster. And check out these other great money-saving articles: