Follow these 12 financial commandments religiously and bid your money worries bye.
Biggest Money Worries
1. Extravagance: This problem results from poor planning. Credit cards are also partly to be blamed; so do away with more than one credit card. Try paying more in cash.
2. Low Saving: The reason has been the low rate of interest. One way to initiate saving is to have money automatically deducted from your paycheck and deposited in your bank account.
3. Money Scarcity: A lot of us find ourselves consistently short of money. Preparing a budget is a simple way to manage your money and live within your means.
4. No Retirement Planning: You need to save at least 15 percent of your income each year for retirement. In real world, only a few of us are able to reach this goal. To start with, invest in 401k and open an individual retirement account now.
1. Pay Yourself First
Whenever you decide to pay your bills, write the first check to yourself. The portion of the earnings that you set aside for yourself can be invested or deposited in saving account.
The habit, if practiced on a regular basis, can help you build cash buffer, thus increasing financial security for your future.
If you are just getting started to manage your finances, savings might seem impossible as you have to pay rent, mortgages, grocery bills etc.
Begin by setting aside 10 cents from a dollar. You will eventually realize that the process is painless. Once you develop this habit, increase the percentage over a period of time.
2. Manage Your Credit Card Debts
Credit cards have revolutionized the American way of life but their successful application calls for certain precautions.
Do not indebt yourself in the process of keeping up with the Joneses. Giving in to the social pressures and spending extravagantly is nothing but silly.
Pay your credit card balance on time. If you pay late, the credit score falls down and so does your credit worthiness. To improve the score, keep your balance below 30 percent of your credit limit.
Click here to read ‘5 Tips for Credit Card Management’
3. Spend Frugally
Plan your purchases. Buy commodities when you really need them and purchase them during sale seasons.
Do not buy things that can be easily rented, like DVDs, books, etc.
Buy used cars. Most vehicles lose value within the first few years. Purchasing model that is less than five years old is beneficial. It helps you drive a car at a fraction of the new car price and saves cost on insurance and taxes.
Click here to read ‘6 Tips on Frugal Living’
4. Get Pre-approved Mortgages and Pay Them First
Make sure your mortgages are approved by your financial institution before you start house-hunting. The seller gives preference to a low offer amount sanctioned by the bank rather than a higher bid lacking financial support.
Pay your mortgages before clearing other expenses. Though it may take away the maximum part of your earnings, this will at least ensure that you have a roof over your head.
5. Never Skimp on Healthcare Benefits
Cutting down on your healthcare benefit is the worst idea to save money. Saving a few hundred dollars a year is worthless in comparison to $50000 that you might pay in medical bills few years down the line.
Get your medical examination done regularly. Your doctor might have given you a clean bill of health presently, but you never know about the future. Buy health insurance coverage and make sure the prescription costs are covered.
6. Invest in Life Insurance
The insurance policy should be purchased with the aim to provide support to your family in case of your untimely passing. The idea is not to make your family rich but to provide them financial security to pay mortgages, college expenses and other liabilities.
While applying for a life insurance policy, answer all questions honestly. It’s better to pay for your mountaineering hobby now, then having your family’s claim on the policy denied in case of an adversity.
7. Shop for Discounts on Various Insurance Policies
Your insurance company may not volunteer discounts but seek reductions. Discounts are offered on multi-policy schemes. You can also get reduction on your home insurance policy if you have proper security system in your house. Cost cuts are also offered on auto insurance if you meet set criteria.
Paying high deductibles is also a good idea. Deductible is the amount that you have to pay before your insurance policy starts. Higher the amount paid as deductible, lesser will be the price of your insurance policy.
Do not file too many small claims. This may lead to cancellation notice on your policy when renewal time comes around.
8. Apply for Prepaid Programs and Rebates while Planning Education
Many education institutes offer program that cut costs and maximize education benefits. If your child is in a state school, you can apply for the prepaid tuition program. When you go for such programs, you lock up the tuition cost and are thus saved from the inflation adding up to the education cost.
There are many rebating programs available that allow you to save for college education of your child. Upromise is one such program that helps you save money through their ‘Upromise.com College Fund Plan’.
9. Invest Prudently
Picking stocks for the sake of investing is a poor investment decisions. Do not pretend you know everything about the money market when you know nothing. You could end up losing money.
Make investment decisions after attaining enough knowledge.
Diversify your investment portfolio. Do not put all your eggs in one basket. Invest in liquid assets too like Certificate of Deposit etc to keep your investment close to home in case an emergency strikes.
10. Borrow Wisely
Interests on loans differ from one financial institution to another. Update yourself on the best interest rates and terms.
Never ever take a loan on your credit card. Not only do these cash advances attract high rate of interest but you will also have to pay high fees on your credit card balance.
11. Identify Tax Deductions
Many taxpayers are not aware of tax deductions they are eligible for. As a result, IRS gets millions of dollars in the form of overpaid taxes.
Tax deductions are available on all charitable works, student loan, child care expense, and any mileage traveled for official work, beyond what you normally travel.
To get the benefit, keep track of your receipts and checks to prove your deductions. Keep them for at least three years. After this period, IRS cannot question these deductions.
12. Know Your Retirement Benefits
Majority of the workers are entitled to social security benefits. These benefits vary according to the job and age of retirement. Higher the earnings and the later you retire, more are the benefits from social security.
Invest in individual retirement account - a program meant to earn and earmark funds for retirement savings. This account provides huge tax benefits.
Update yourself on the 401K investments. This is the free money that your employer provides when you retire but for this you have to ensure that you are putting money in it too. These 401K paycheck deductions are tax deferred; as a result, you tend to save more money.
One final tip, money is important but not everything. Worrying about money never solves problems; in fact, it adversely affects one’s health and happiness. So leave your worries behind and get yourself started on laying a strong foundation for a secure financial future.
Solid advice
These are some really great tips for keeping a good grasp on your money. I wish that more people would follow these rules but unfortunately very few people do.
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