The New Year is the perfect time to establish goals, such as committing to get in shape or setting goals to save. A new year is also a great time to reassess your personal finances to see if you need to create a new budget or saving plan. Taking control of your personal finances will allow you to save as well as prepare for unexpected expenses.
Get Organized → Create a Budget → Lower Your Personal Debt → Save for the Unexpected
Get Organized. Develop a system to organize your personal finances. For example, create file folders for creditors and alphabetize them, so they can easily be found. While you’re at it, consider purchasing a paper shredder to safely dispose of your personal information that you no longer need.
Create a Budget. Develop a household budget to track your income and expenses. If you have any debt, a household budget will help you pay down unpaid balances as well as identify other ways to reduce monthly expenses, so you can still save money. There are computer software programs, such as Excel, and basic budgeting worksheets available to help you create a household budget. Be sure to include as much information as possible and review your household budget regularly, if not monthly.
Lower Your Personal Debt. Personal debt from student loans, a home mortgage and credit cards are common; however, there are ways to minimize the financial stress that can often result. For example, consider paying more than the minimum due and pay on time. Also, pay off debt with higher interest rates first, or transfer the high interest rate debt to a lower rate credit card. Most major credit card companies offer an enticing introductory interest rate, in some cases as low as 0%, for up to 24 months based upon credit worthiness.
Save for Retirement and the Unexpected. Saving is important as it ensures a comfortable future that can withstand hiccups in the economy. No matter how old you are, it’s never too late to begin saving.
- Save at least 10% of your income for retirement. Be sure to take advantage of an employer-sponsored retirement plan. Contribute the maximum amount your employer will match. Contributions made to these types of plans are tax deductible. If your employer does not offer a retirement plan, then consider setting up an IRA or Individual Retirement Account. IRAs offer tax-deferred growth, so you will not have to pay taxes until you make withdrawals. Banks and wealth management firms offer IRAs.
- Most people will tell you to tuck away at least six month’s salary in a savings account in case of an emergency, such as an unexpected hospital bill or loss of a job.
- Increase your contribution to your retirement plan on an annual basis. For example, if you generally receive a 3% raise each year, then direct 1% of your salary adjustment to your retirement plan.
- If you participate in direct deposit at your employer, then ask to have a specific amount directed to a savings account. This way the money will be set aside before you have a chance to spend it. If your employer doesn’t offer direct deposit, most banks offer automatic transfers from checking to savings accounts. Consult with your bank for more information.
Following just a few of these financial tips will get you off on the right foot towards becoming financially fit in 2019 and beyond. If anything, the most important thing you can do for yourself now to ensure financial success is get organized and create a household budget you can stick to.
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