10 reminders for financial success
(By Mark Tew)
If you attend town hall meetings at work, church meetings, political rallies, or any other type of recurring group gathering, you notice pretty quickly that the messages are generally the same. Why would someone go to church every single week just to hear the same thing over and over and over again? Why do we have to go and get a pep talk from the CEO every quarter about what we need to be doing to make our company successful?
As emotional human beings, we are subject to pain, discouragement, sickness, anger, and sadness. All of these things can demotivate us, and the fact is that we need that recurring encouragement and support.
Personal finance is no different. We need to be reminded of the basic things we should be doing and why they are important. So here you go—10 reminders of small things you can be doing right now to set yourself up for financial success, in no particular order.
1. Get serious about student loan debt
If you don’t have any, good for you! There is generally no way around paying back your student loans. Set up automatic withdrawals to accounts you use specifically for paying off your loans. Pay more than the minimum balance. Try to pay off as much as you can before the end of the grace period.
2. Make a plan to get an emergency fund in place
The general rule is 3 to 6 months of expenses. If that seems overwhelming, start by saving up $1,000. Stick it in a savings or money market account, and do not touch it unless it’s for an emergency.
3. Use credit responsibly
Having a credit card can be a good idea if you trust yourself with spending. It can help you establish good credit. Just be sure to treat it like your debit card and not like free money.
4. Start contributing to your retirement
Retirement may seem very far away, but now is the time to start taking advantage of the compounding effect of interest. If you don’t have access to a 401k through your employer, consider opening an IRA.
5. Pay off consumer debt
Credit card interest rates average about 15%! Student loan rates are closer to 7%. That tells you that you should prioritize getting rid of any high interest debt as soon as possible.
6. Budget
Each of your earned dollars needs a job. If they don’t, they will disappear leaving you wondering where they went. Start by tracking your spending using a spreadsheet or a web-based service like mint.com. Then start budgeting how much you need to spend to reach your savings goals.
7. Set other Financial goals
Also think about medium and long-term goals. Do you eventually want a house? A vacation home? Kids? Travel? All of that requires additional planning. Figure out what you want, and then figure out what type of financial habits you need to get there.
8. Think about insurance
Do you have life insurance? Health insurance? Your insurance needs will vary depending on your circumstances. If you’re in your early 20s, you might still be covered under your parents. If you have kids, life insurance is a must.
9. Plan for short term expenses
On top of an emergency fund, everyone should have a short-term cash fund. If you know you will have to replace your roof or your air conditioning unit within the next 3 years, you need to be saving up for that. If you can plan for it, it’s not an emergency.
10. Know when to cut back and when to earn more
Being frugal and cutting back on your expenses is a great way to get a good handle on your finances, but it has its limitations. You can only cut back so much. There are no limitations, however, on how much you can make. You just have to use a little bit of creativity to start making some extra money on the side.
The key is starting. If it seems like too much, just start by focusing on one or two of these suggestions. When you feel yourself becoming discouraged or lax, just go back to the source that motivated you in the first place. We all need these reminders. And that’s okay, because we’re all human.
