Personal finance prosperity requires a long-term plan, dedicated effort and regular check-ins to maintain focus. It takes work to reach financial goals.
Millions of Americans complain about high debt, low savings and a paycheck-to-paycheck lifestyle that seems difficult to escape. But if you take the time to get your money systems setup, you can relax as your money goes to work for you.
Here are some easy-to-follow tips to avoid putting off getting your finances in order. Â
Start a Budget Already
Do you know you should budget but donâ€™t think you have the time to put one together? Wrong! Anyone can budget in the time it takes to check your email. And you can do it on your smartphone or laptop.
Popular budgeting apps Mint (free) and YNAB (paid) connect to your bank accounts, credit cards, loans and other financial accounts to summarize everything in one convenient dashboard. Both are secure and put budgeting features front and center.
Each time you make a purchase or other transaction in a linked account, Mint and YNAB pull in the transaction automatically and categorize it to a budget category. It takes no effort after setup.
Remember, a budget isnâ€™t something that restricts your spending. It is a spending roadmap you follow every month to ensure you donâ€™t overspend without realizing it. Budget for needs first, like rent or mortgage, groceries and utilities. Then move on to important wants, which may include dining out and clothing. Finally, the fun wants like travel, the latest iPhone and entertainment.
Remember to budget for savings, retirement, debt payments and other important places to put your money.
Automate Retirement Savings
You are not alone when it comes to juggling competing financial demands. But remember helping your kids pay for college, assisting with medical and other costs for aging parents and other goals requires a mindset similar to an airplane emergency. You have to put your oxygen mask on first before assisting others.
The first place to start is your emergency savings and retirement savings. After building an emergency fund with at least three to six months of savings (double that to six to 12 month for the self-employed), you should automate your retirement savings to ensure your live the retirement you want.
While Social Security covers a portion of your retirement costs, most financial experts suggest saving at least 10 percent to 15 percent of your gross salary at minimum to maintain the same standard of living in retirement. If you earn $50,000 per year, that means you should be saving $5,000 to $7,500 minimum in a retirement accounts.
If you work at a large employer, you can usually setup automatic 401(k) contributions with employer matching in the 3 percent to 6 percent range of your salary. Always take full advantage of your employer match. If you save 3 percent and it is matched to another 3 percent, that is the same as 6 percent in savings, more than half of your minimum goal.
If you get paid with direct deposit, you can likely split your paycheck into multiple accounts. If you are paid bi-weekly with 26 annual paychecks, saving just over $211 per pay period in an IRA or Roth IRA gives you enough savings to hit the annual $5,500 limit. Those 50 and older can save an additional $1,000 per year.
Pay Off Debt While You Sleep
Debt payments have you down? Youâ€™re not alone. The average college graduate today leaves with tens of thousands of dollars in debt. When you take into account student loans, credit cards, auto loans, personal loans and other costly non-housing debt, it can feel like a big job to keep everything under control, let alone paid off.
But you donâ€™t have to make all of those payments by check or through a manual process online. Using your bankâ€™s bill pay system or your lenderâ€™s online system, you can setup automatic debt payments that will get your debt paid off for good. Stay on a budget so your balances donâ€™t grow as you pay them down.
To get an even better result and faster debt payoff, which can save you a ton in interest over time, you can follow the popular Debt Snowball or Debt Avalanche plan to wipe out your balances. The Debt Avalanche, mathematically the best debt payoff method, encourages living on a tight budget and making extra payments to your highest interest debt until paid off and moving along through each loan until youâ€™re completely debt free.
Adopt a Money Managing Mindset
Once you have your budget and automate your savings, debt payments and investments, your money should run on auto-pilot. As long as you avoid overdrafts and stick to your budget, things should work. But that doesnâ€™t mean you canâ€™t do more and better.
Even if you donâ€™t have a finance degree or the background of a financial advisor, you can level up your knowledge and get in even better shape for the future. By putting your finances first, you are making a smart long-run decision.
You donâ€™t have to look at your money daily, unless you want to. A weekly check-in using your favorite money management app is a good start. And take time to do a monthly budget and detailed money review. For a quick and useful summary, the app Clarity Money shows your account balances and spending on your smartphone with just a few quick taps.
You Donâ€™t Need an MBA to Take Charge of Your Money
A famous quote attributed to Albert Einstein says â€œcompound interest is the most powerful force in the universe.â€ Those who donâ€™t understand it pay it. Those who understand it earn it, according to the quote. This is true of all things having to do with your money.
Donâ€™t use a lack of money knowledge as an excuse to neglect your money. Learn what you need to put your money to work for you. Thatâ€™s the best route to avoid financial procrastination become a serious money boss.
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