Advice on Managing your Personal Finances
Are you considering a program of personal finance?
You should consider what are your long-term and short-term goals? Are you planning for retirement or just for a nice new car? Once your goal is clear, you can set a practical way to achieve that goal. How much money is coming in? What are the risks and rewards with your plan?
Do you or will you have student loans? It is important that providers make sure you know what your financial obligations are in relation to paying your debt. Work them into your budget every month and do what you can do pay down your student loan debt when you can.
If you are behind, as many are, when it comes how much you are saving for retirement, get in high gear and catch up. Adding a little extra per month than you normally would to your retirement plan, can catch you up faster than you think it will. Especially, if it concerns your 401k, because your employer will match a certain percentage of your contribution. You must figure out how much revenue versus expenses you have. This requires following a strict budget and adhering to it always.
If you’re working on improving your personal budget, one easy way to get yourself in the mindset is to get your paycheck put directly into an investment account rather than checking or cash. This way you pay yourself first, think of this as a tax but you get it for retirement. This will help get you in the habit of saving money and not thinking of it all as disposable income. In order to be economically wise, all of your disposable income must now be considered as investment funds, only to be spent on assets that return you funds at a good rate.
Make paying down high interest credit card debt a priority. Pay more money on your high interest credit cards every month than you do on something that does not have as big of an interest rate. Your goal will be to remove all debt, especially debt at higher than 2 – 4% interest. Credit card debt should be removed immediately as the interest rate here are through the roof.
Don’t apply for credit that you have no chance of getting. Every inquiry into your credit history that is authorized by you can affect your credit score. If you are applying for what is considered too much credit, your score can be lowered and this could prevent you from getting credit that you would have otherwise qualified for.
It is critical to go through your budget and to stick with it. There is something very concrete about going over it and writing it down. It makes your income versus spending very real and ensures you know how much you can spend each month on expenses and how much you should be paying off debts or increasing your investment fund by. Evaluate your budget monthly to make sure it’s working for you and that you really are sticking to it. Are they any hidden expenses that are sneaking through.
Never loan money to friends and family, there are some exceptions to this, but generally do not mix friendships and finance. When you loan money to someone that you are close to emotionally, you will be in a tough position when it is time to collect, especially if they do not have the money, due to financial issues.
The best way to save money is to get rid of any high interest bearing debt such as credit cards. Then get rid of lower bearing interest rate debts while at the same time creating an invesstment fund. Review this article which I wrote about How to Become a Millionaire. Unless the credit has a prepayment penalty you should always pay down anything that has interest as quickly as you can. These steps can save you hundreds or thousands of dollars a year.
Many people opt for 15-year mortgages to get their homes paid off more quickly, you may consider going towards a 30-year mortgage. The advantage of this is that mortgages are low interest bearing debt and you can save more into your investment fund by doing this. Sometimes having to pay off the mortgage quickly can put a lot of stress on a person’s or family’s finance.
Be frugal with your personal finance, frugal and cheap are not the same, always be frugal.
A good example of being frugal is buying a one or two year old car versus a brand new car. The minute you drive a brand new car home, you have lost anywhere from 25 – 30% of its value. If your car was purchased for $ 25,000, your drive home could cost you $7,500. Unless you have money to burn, do not do this.
After reading these tips you should be getting ready to draw up a plan in your mind for achieving your goal. Always think of the long term and work in your short term goals within your long term goals. The biggest takeaways from this are – do a budget, stick to it, pay off high interest bearing debt (credit card debt), always put aside fixed amount and invest in a high return investment and always be frugal. By doing these simple steps, you will achieve financial freedom, it will not happen overnight but it will happen.
The key is to start right away!
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