Everytime is a good time to analyze your financial health. If you were one of the fortunate to be able to be financially sound all year- great job! For everyone else, it’s a second change to analyze spending and debt. You can make a conscious decision about the rest of the year regarding your finances . Some people may do better with a 3-4 month window of cutting costs and trying to save money. We are living in a very uncertain time and now that more thank 30 million Americans have applied for unemployment benefits, its even more important that we analyze our finances.
Here are my top 7 personal finances tips that everyone should know:
1. Get out of Debt– I know it definitely sounds easier than in actually is. Getting control of your spending and actually taking the time to analyze where your money is going will help you to get out of debt quickly.
Make the most of every dollar EVERY TIME. I couldn’t believe how much money I spent on frivolous purchases. Keep essential expenses like housing to 50% of your income. Then allocate 30% for wants and 20% for savings and debt pay down. This is referred to as the 50/20/20 budget. This is a tried and true way to keep you on track to financial freedom.
People who are in debt someone also consider a part time job or other side hustle to get their debt paid down faster. There are numerous part time jobs that you can do; some from home, others with little to no effort. Whatever you decide to do, keep your eye on the prize- ELIMINATING DEBT. Depending on how much debt you have, you may only have to do it for a short time.
2. Analyze your Spending– Your spending habits have to be aligned with your values. You have to be able to live within your means. Beyond the golden rule—spend less than you earn—it’s hard to be prescriptive because expenses are the result of so many individual decisions, many of which feel inconsequential as we make them.Take note of transactions that don’t align with your values or needs. And ask yourself if you could have lowered the cost of the keepers—did you compare prices while grocery shopping? Did you look for a coupon code or rebate to get a better price on an online purchase? Could you opt for a less expensive gym membership or newspaper subscription?
3. Pay off credit cards in full every month. There is a common myth that carrying a balance on your credit card from month to month can benefit your credit scores, but that is not true. Ideally, you should pay off your credit card in full every month. Leaving a balance will not help your credit scores. All it will do is cost you money in the form of interest.Interest rates on credit cards can be very high. One thing to always be especially careful of doing, it paying for something with a credit card and then having to inadvertently pay 5 times the cost due to high interest rates. Make it a personal goal to pay your credit card bill on time , in fully monthly.
4. Make Extra Payments– When you pay extra payments directly on the principal, you are lowering the amount that you are paying interest on. It can help you pay off your debt much more quickly. … The key is to make extra payments consistently so you can pay off your loan more quickly.
5. Do Not Cosign For Anything . Ever been asked to be a cosigner for a car? On paper, it sounds like you might be helping someone out. Maybe your spouse needs help with that vehicle purchase or it’s your child’s first car. Unfortunately, there are often more reasons not to cosign than there are exceptions.
There’s a lot on the line, especially when it’s a personal loan with a cosigner (namely you) to help move things along. While you might think you’re helping someone, how that person conducts themselves when it comes time to settle up with the lender can reflect negatively on you.The reality is, if the lender felt the original debtor could pay back the loan on their own, they wouldn’t need a cosigner. You might cosign on a loan for a car you’re not driving or a mortgage for a house you don’t live in, but that doesn’t change your liability. Your credit score benefits only slightly from the monthly payments. And since you qualified as a cosigner because of your good credit, you don’t necessarily need more credit lines.By cosigning a loan, you take on all the risk if the loan is not repaid but may only see a modest improvement to your credit score choose not to repay or fall on especially hard time, you are now responsible for paying it back.
6. Pay off your student loans. Part of providing for yourself after graduation may involve paying off student loans, which can be a major responsibility. There are lots of options with paying off student loans. This can be an huge debt and make you feel undefeated. Be sure to consolidate and if needed apply for income based repayment options. Be sure to research what is best for your particular situation.
7. Do not borrow from your retirement accounts. Dipping into your 401(k) plan is generally a bad idea. But that advice doesn’t deter about a quarter of the people who hold one of these accounts from making a raid on their funds. Most 401(k)s allow you to borrow up to 50% of the funds vested in the account, to a limit of $50,000, and for up to five years. Because the funds are not withdrawn, only borrowed, the loan is tax free. You then repay the loan gradually, including both the principal and interest. Interest rate on 401(k) loans tends to be relatively low, perhaps one or two points above the prime rate, which is less than many consumers would pay for a personal loan. Also, unlike a traditional loan, the interest doesn’t go to the bank or other commercial lender, it goes to you. Since the “interest” is returned to your account, some argue, the cost of borrowing from your 401(k) fund is essentially a payment back to yourself for the use of the money.