Everyone’s eager to have financial security for their future. But knowing these steps will make it easier for you to achieve it!
If you truly want to improve your finances and long-term financial security, you will have a far higher chance of doing so if you choose two to three short, attainable goals that allow you to observe improvement over the course of six to twelve months. Following these steps will inspire you to continue:
Imaging Your Future
Weiss suggests evaluating your finances before selecting your top two or three priorities. Monthly earnings? What is your return? What are your expenditures and savings? Your assets’ value? Your liabilities?
Next, evaluate your spending. Rose Niang, director of financial planning at Edelman Financial Engines, suggests creating a “needs” and “wants” column to track your expenditures. Rent and mortgage payments are necessary. Buying flowers monthly is a desire.
To determine what funds can be redeployed if you decide that other things are more essential than improving your financial status.
Make 1% Change
Start small if saving more will make you happy and calmer on a tight budget. Whether you’re saving for retirement, college, emergencies, a down payment, or a bucket-list vacation, a one- or two-percentage-point annual gain can make a significant impact over time.
That will not reduce your discretionary income. If your retirement savings contribution rate in your employer’s 401(k) or 403(b) plan is low, increasing it by one or two percentage points, say from 5% to 6% or 7%, will provide you with a triple benefit: more money saved, a larger matching contribution from your employer, and a larger tax deduction this year due to the tax-deferred nature of retirement contributions.
Pay High-Interest Debt
This year, credit card interest rates have reached all-time highs. While a 1% to 2% increase in debt repayment can be beneficial, throwing more at it will pay off in the short- and long-term since too much of your hard-earned money goes toward interest rather than principal.
A good balance transfer credit card with a 0% introductory APR for up to 21 months may help you pay down debt and save money on interest. Ensure that the card has low fees and penalties and that you can pay off the balance before the introductory period ends.
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Guard Yourself Against Higher Rates
As the Federal Reserve boosts its benchmark rate to combat inflation, interest rates will likely remain high or increase higher.
This is not the year to accomplish that, adds Niang. If you lose your job or experience a pricey emergency, begin saving immediately. Niang suggests changing variable-rate private student loans into fixed-rate loans to avoid rate increases.
Protect What Matters Most
If you have young children and want to ensure their financial security in the event of your untimely death, you may want to consider supplementing your employer-provided life insurance policy.
You may also wish to consult with an estate planning professional to see whether a trust makes sense in light of your family and tax circumstances.
Make sure your portfolio is diversified
Avoid placing all of your eggs in one basket unless you are a future-predicting investing genius.
Diversify your portfolio across stocks and bonds, investment categories such as growth and value stocks, corporate and government debt, and industries such as technology, manufacturing, and health care. Temporal horizon and risk tolerance define splits.
But, you seek long-term gains from your investments.
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