Many people struggle to meet their financial goals because this is a subject that is not taught in school. Personal finance encompasses a broad range of topics from budgeting, banking, mortgages, insurance coverage, retirement planning, and even estate planning. Each person will have different financial goals, apart from addressing daily financial needs. Some set aside money for their kids’ college education and some do it save money to fund their future business.
Whatever the reason may be, it is critical to come up with a plan to address those needs. To make the most of your income, you need to strategize better and make savvy decisions. Remember, it is never too late to visualize your financial goals, so you can give your family security. Here are simple personal finance strategies you can use to help you boost your financial standing:
Give yourself a Working Budget
There is a wise saying that failure to plan is planning to fail. This monthly budget is part of your plan that will keep you focused on your goals. It keeps you from spending needlessly on unnecessary things that drain your saving. Having a budget is an essential component to living within your means, yet saving enough money to be able to meet those future long term goals.
Fifty percent of your income should go to your daily expenses like utilities, food, gas money, rent, and the like. Thirty percent can be allotted for lifestyle choices like dining out, watching a movie, buying new clothes. Another twenty percent goes towards your savings for retirement and possible emergencies. Be vigilant in tracking expenses. To keep you from dipping your hand in the savings fund, be sure it is in an account that you can’t just easily access online or with an ATM, so you can easily stick to your budget.
Be Sure that Have an Emergency Fund
It is critical to set money aside for unexpected life expenses like health emergencies, tire blow outs, getting retrenched from a job, and more. The safety net that you must save is at least six months worth of living expenses. This gives you enough money to live comfortably, while you go look for a job.
Many financial planners say that it is advisable to put twenty percent of your paycheck towards building this fund. As you can see, this twenty percent is already covered by your budget, which is stated in the aforementioned category. Nothing is worse than being slapped by unexpected life events. However, you can help ease the blow of those unpalatable events if you are prepared.
Use Those Credit Cards Wisely
It is tempting to go on a shopping spree but if you can’t afford to pay for it in cash at the end of the billing cycle, then just don’t. It is a bad habit to be hooked on credit card debt because of the exorbitant interest fees. However, if you are a responsible user who can track your spending and pay in full each month, then go ahead and use it. You can even opt to set-up an automatic online bank payment to ensure that you never go past your due date. Credit cards have the perk of earning points and getting you freebies and discounts, which cash transaction don’t offer. Most of all, using a credit card responsibly has the power to boost your credit rating.
Limit your Debt
Don’t let your debt get out of control because it will drain your resources and make a negative mark on your credit history. Borrowing money for a mortgage to buy your shelter is a good investment because you will no longer throw away money in rent. Getting a car plan that you can afford to pay with ease, which gets you to and from work is also a calculated debt. However, going into debt for travel or luxurious brand name items just to keep up with the Joneses is totally a bad idea because you cannot sustain that kind of lifestyle.
Keep an Eye Out for your Credit Score
If you spend using credit or if you have loans in your name, it is critical to keep an eye on your credit score. This has the capacity to affect a lease, mortgage, or any other type of financing options you may want to make in the future. Be vigilant when it comes to paying on time. Also be mindful of your debt-to-credit ratio. All of these are factors that can influence your credit history.
If you monitor your credit by getting feedback from one of the reporting agencies, you will be able to see and detect any errors or fraudulent activities. It is important to note that the federal law actually allows you to get free credit reports from these 3 major credit bureaus: Equifax, Experian, and TransUnion. A few credit card providers like Capital One will also give the reports for free. On top of that, there are free websites that offer free credit reports such as Credit Karma or Wallet Hub.
Protect your Family
Protect your assets and keep your family from going to probate court and paying huge estate taxes by doing estate planning. Having a last will and testament is important to keep them secure because accidents happen when you least expect them. This document will state all your directives in case something happens to you. Do not shy away from making a will. This is not courting disaster but being responsible for your love ones.
On top of this, it is critical to get yourself life insurance. If you can afford to insure your car and home, then you must insure the most important person in the equation, your life. This insurance will give your family peace of mind in case something happens to their breadwinner. It can include riders that can cover accidents or critical illnesses. There are many choices to choose from, so do your research.
There are many other methods to beef up your personal finance, but the above mentioned are the key strategies you must pay the most attention to. To get those finances on the right track, it is important to be responsible and to be vigilant in making your assessment, exercising restraint when needed, and choosing those priorities.