The older that we get, the more we come to realize that our finances really do matter. Whether you’re saving to buy your first house or closing in on retirement, getting your finances in order is an important step to take. You can hire a financial planner to achieve your goals or try to go it alone, but you must start paying attention to what your bank account is trying to tell you. Here are five ways that you can boost the health of your finances:
1. Create a Budget
The first step to taking control of your finances is to create a budget. The budget that you make doesn’t have to be a complicated one, but it does have to be one that you stick to. There are several great pieces of software available to help you create the perfect budget for your family. If you’re the paper and pencil type, simply sit down with a notebook and record your income and expenses.
2. Use the Snowball Effect
If you are neck deep in credit card debt, it will take you dozens of years to pay it off if you continue to make just the minimum monthly payments. Instead of sending small amounts of money to each credit card, use the snowball effect of debt repayment. Combine each of your small monthly payments and use them to pay one credit card. When that card is paid in full, move on to the next card, sending them the same amount of money you were sending to the first. Continue in this manner until all of your credit cards are paid off.
3. Build an Emergency Fund
Every family should have an emergency fund that can support them for three to six months. Start with a nest egg of $1,000 and make monthly deposits to build your savings. Setting a goal will make it easier for you to save what you need. Be sure to add your monthly deposits into your budget so you feel more obligated to make them.
4. Open a Retirement Account
It’s never too late to start saving for retirement. If you don’t have a retirement account, now is the perfect time to open one. After you’ve paid off your debt and your emergency fund is where it needs to be, it’s time to start depositing funds into a 401k, 457 or 403b. Don’t plan for retirement in lieu of paying your debts; you’ll only be putting off the inevitable.
5. Evaluate Your Insurance
Every family should have medical, life, home, auto and disability insurance. If you don’t have these policies, discuss your options with your employer. Insurance policies are there to protect both you and your finances. If you are hurt in an accident, for instance, your auto insurance can fix your car and your medical insurance can fix your body, both with less money leaving your pocket. It’s not unusual for people without insurance to find themselves bankrupt after a single incident.
If you have yet to take control of your finances, what are you waiting for? Now that you know what to do, you’ve run out of excuses. If you aren’t sure where to begin, hire a professional financial planner who can assist you in setting goals and starting you down the path to financial freedom. There’s no time like the present to start planning for your future.
Recommended Books from Amazon:
- Suze Orman’s Action Plan: New Rules for New Times
- Women & Money: Owning the Power to Control Your Destiny
- Rich Dad’s Increase Your Financial IQ: Get Smarter with Your Money
- Rich Dad’s Guide to Investing: What the Rich Invest in, That the Poor and the Middle Class Do Not!
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