Habits for Make Smart Money
If we have reached the month of March and New Year’s Resolutions have completely flown out the next window, we are not alone. Only few of people are successful in achieving their resolutions. They also noted the number of money related resolutions was near thirty-four percent, so the low success rate is troubling because failing at smart money management can impact your future. Let the following habits for make smart money serve as a guideline to help you get your finances in order and make life-long, healthy financial choices:
1. Know Where is our situation – The first step in getting started is understanding your starting location so you can track your progress. This includes taking an inventory of your assets and liabilities (what you currently own and currently owe) and determining your net worth. It is helpful to track your living expenses so you can determine where you spend money and better organize your spending habits.
2. Make a Budget – Some people think “budget” is a scary word. A budget should incorporate your monthly expenses and those that come up on occasion. It should also be a tool to help you pay down debt. If it makes you feel better, just call it your “Planned Spending” report.
3. Cut your deft from list – Debt can hold you back from achieving your goals, so you should take immediate steps to get out of debt. Include paying down debt in your monthly budget so you don’t overlook the action. There are different opinions as to the best plan to get rid of debt (for example, paying off loans in order from smallest to largest, or paying debt off in order of highest interest or lowest), but the point is to develop a plan and stick to it.
4. Make an emergency spare fund– A great defense against accruing more debt is developing an emergency fund. Determine how much it costs your family to live each month. Then, think about how secure your job is and how long it might take to find a new one if you lost your job. This can help determine how many months’ worth of an emergency fund you should set aside for a rainy day. Most advisors suggest having at least 3-6 months of normal living expenses set aside
5. Advance fund for big purchase– Some future purchases are inevitable, and can be planned for to help reduce the need for taking on debt when you’re ready to buy. A simple formula will help you determine how much you should save each month before the purchase to be able to pay without credit: Total $ Needed / Number of Months Before $ are Needed = $ to Save Each
6. Invest using proper system – It is never too early to begin saving for the future, and the longer you save, the longer compounding interest has the power to work for you. Consider investing 10% of every dollar you make, minimizing expenses, diversifying your investments, and sticking with a long-term savings/investment plan. If you are able, maximize your retirement plan to benefit from this pre-tax savings vehicle.
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