Tips to Get Your Financial Life Under Control
Money makes the world go round, but most of us have limited resources that we must make the most of. Unless you have a high paying job, it is easy for your financial life to spiral out of control, but the following advice can help you rein it in.
Set up a monthly budget. Begin by listing all your sources of income; then list all your expenses for each month. Ideally, you will have more income than expenses. If that is not the case, you will have to do what you can to eliminate some of your expenses. When you know how much money you have to work with, you can allot a certain portion for each of your known expenses.
If you have accumulated credit card debt, it is a good idea to pay it off as quickly as possible. Begin by paying off the card that carries the highest interest rate, as that can save you the most money in the long run. Some people like to pay off the card with the smallest balance first, as that makes them feel like they have made progress. You can use that method if you prefer, but you will save more money by paying off the credit cards with the highest interest rates first.
Build up an emergency fund that you can easily access if and when the need arises. You should keep three to six months worth of living expenses in this fund, so that you will have enough money to tide you over if you should lose your job, become ill or sustain an injury that prevents you from working temporarily.
Insurance is a vital component of your financial plan, and you should review your policies periodically to make sure that you have enough insurance and the premiums are the best you can get. Make sure that you have health insurance, life insurance if you have a family with children, auto insurance if you have a car and home or renters insurance.
Start socking money away as early in life as you can to help fund your retirement. The sooner you start saving, the more money you will accumulate, the sooner you can retire and the more comfortable your golden years will be. Take advantage of any retirement plans offered by your company, but also consider using a traditional or Roth IRA.
At least once a year, you should review your investments and rebalance your allocations. This helps ensure that you are not overly invested in one sector to the detriment of another, and can help mitigate the risk that you will lose a substantial amount of money in one sector.
Use your credit cards responsibly. It is best to pay the entire bill each month, if at all possible. That way, you do not wind up paying any interest or fees. If you have trouble in this area, use cash or a debit card for most purchases. This forces you to use money that you have, as opposed to a credit card that allows you to borrow money that you may not have available for immediate use or repayment.
It is important that you adopt a lifestyle in which you manage your finances responsibly. Debt can easily spiral out of control and wreak havoc with your credit rating. Use the tips above to help you remain financially healthy throughout your life.