Tired of the constant unsolicited financial advice given by the so-called money experts in your environment? These people could be anyone including your relatives, friends or even acquaintances that you often run into during your morning walks! While one may urge you to invest into blue-chip stocks, others may consider them an absolute waste. Your real estate agent may say that it’s a buyer’s market today, while your father may be completely against the idea of investing into a property today. Who should you listen to?
A better idea is to simply cut through all the noise and follow some tried and tested methods of managing your money effectively. Let’s go through 6 of them:
Start working on creation of an emergency fund
There is not even one reason why you shouldn’t start working on building an emergency fund today, and a million reasons why stashing away 5 to 6 months of your monthly expenses is an excellent idea.
A medical emergency may come up. Your car may break down. Natural calamities aren’t unheard of either. And there are many more unexpected situations that may suck up your hard-earned money. Having an emergency corpus can be a godsend in such situations.
So, if an unexpected expenditure does come up, you’ll be able to use your own saved money rather than having to depend on a credit card that may expose you to extremely high interest rates.
Create a monthly budget
Although some people argue that not everyone benefits from such budgeting, taking out time to note down your monthly household expenses and then prioritizing each one of them as per your needs can’t be anything but beneficial.
In case you’re not too keen on downloading any fancy software or are concerned about the logistics aspect, forget everything and simply start with a pen and paper. The only things that you’d need apart from them are your monthly bills and bank statements of the last few months.
If not for anything, creating such budget can at least help you keep regular track of your monthly expenses. At its best, you can use such budget for improving your investment potential and eventually accomplishing financial freedom. You can never understand and appreciate the kind of impact a budget can have on your monthly finances unless you create and follow one personally. After all, there is nothing to lose!
Start saving for retirement
Although you might get overwhelmed and confused by the great multitude of options available for retirement savings, it’s no excuse for opting out of such exercise. If you don’t want to depend on social security payments after your retirement, you must start planning for your retirement corpus from today itself.
The 401(k) plan offered by your employer is an excellent place to start. Contribute as much as you can and your employer will have to match your contribution. It’s actually free money coming your way! The 401(k) contribution limits have remained unchanged this year and you’re allowed to stash away as much as $ 18,000 per year.
Many financial experts also suggest taking a good look at Roth IRA – an IRA variant that although is funded by your after-tax dollars today, allows you to withdraw your savings tax-free during your retirement years. It can be used effectively along with any type of retirement plan, including 401(k).
Pay off your high interest debt
It’s no news that the interest rates charged on personal loans and credit cards are often much higher compared to the other loan products like car loans, home loans, majority of student loans etc. Furthermore, while the interest paid towards student loans or mortgage is tax deductible, there is no such benefit of carrying high interest card debt. Hence, it’s always a good idea to pay off any such high interest debt at the earliest possible.
Anyone who has been under debt would readily vouch for the fact that debt can weigh you down immensely. It can become a major hurdle in the accomplishment of your financial goals and make it extremely hard for you to move ahead in life.
You must create and start working on a debt repayment plan starting today and win back your much-deserved freedom.
Save on your yearly ‘Big’ bills
Although any sensible person serious about his/her financial future would stay away from unwanted shopping like a plague, one kind of shopping spree that everyone must indulge in at least once a year is shopping for all the ‘Big Bill’ expenses like car insurance payment, life insurance payments etc.
You can save plenty of money by opting to do so, or at least ensure that you’re getting the best possible deal. Experts believe that you can easily save hundreds of dollars by simply calling up a handful of agents and comparing their offers. A few hours of work can result in huge savings.
Review your credit report/score at least once every year
Your credit report and credit score are excellent indicators of your financial health. You can get the best possible rates on car loans, mortgage or any kind of credit for your business if you have a decent credit score and a long credit history.
One of the ways in which you can maintain your credit in good shape is by monitoring it regularly. Fortunately, you can make use of free credit reports provided once per year by the three major credit reporting bureaus – TransUnion, Equifax and Experian.
You can even keep a regular check on your credit score all through the year by signing up for free-of-cost FAKO scores provided by many credit reporting websites. These scores are good means of keeping track of any major credit score movements. Furthermore, some of the credit card issuers also provide their card holders with free online FICO score checking facility.
Please keep in mind that the best financial advice sometimes is the simplest. There’s no point reinventing the wheel when you already have some tried and tested methods of managing your money effectively!