What does managing personal finance mean to you? Being financially fit is more than just having the money to buy whatever we want.
Let’s face it; our personal financial fitness is aimed at developing financial freedom.
Whether you are retired or still planning financial freedom is what we all strive for. It is the calm assurance that we are ok, that we are working to make our future as financially secure as possible.
For retirement, there are things we all must do to ensure financial security and financial freedom.
1. Emergency Savings Account
Life happens, as they say, and most of us are not as prepared as we should be for the emergencies that life can throw our way. Creating an emergency savings fund is essential for everyone and should be a top priority. How much you keep in this fund is a personal decision but being prepared could prove to be a lifeline in a time of need. Managing personal finance is incredibly important. In fact, experts say that your emergency fund should be enough to sustain your household for at least 6 months.
Here are some of the types of insurance that you should look into.
- Health insurance
- Life Insurance
- Disability Insurance
- Auto Insurance
- Homeowners/Renters Insurance
- Long Term Care Insurance
2. Insurance Needs
Insurance is protection, plain and simple. We buy insurance to protect our assets, our home, our health, our cars and our lives. All of this protection is vital to our peace of mind and our financial management. Health costs can deplete even the hardiest of bank accounts during a prolonged illness and the death of a wage earner can devastate the finances of a family. Replacing a car after an accident can be a costly affair especially if other expenses are incurred at the same time.
3. Negotiate for a Better Deal
While you may not be able to negotiate the cost of your groceries in the store, you can shop around for the best deals. Don’t automatically settle for the first offer on items like your phone service or cable bill. With better deals always on the horizon, know what you want and what they are truly worth to you. Items such as property taxes can even be negotiated. Paying the higher dollar does not always mean better quality.
4. Your Budget
The very best way to manage your money and your bills are to have a budget. Sticking to your budget may be harder than you think but it can be done. In order to fully participate in any financial fitness routine, we should all know where our money is going each and every month. Tracking your spending can help you eliminate wasteful spending and perhaps help you with managing personal finance. There are budget plans available and in our debt series, we will be highlighting the different ways to budget your monthly income and bills.
5. Get Out of Debt
Getting out of debt has to be the top concern for all those who have debt. Debt is a topic that is on the minds of many Americans whether it is personal debt or our national debt. While we all talk about it, not everyone feels as though they can do much about it.
Debt is a real problem so getting rid of it altogether will surely be a boost to your financial fitness.
6. Your Credit Score
Now more than ever, your credit score is valuable and needs to be protected. Your credit score will affect your ability to get loans, get credit and certainly the interest rate you will be charged. But it can also affect your insurance costs, signing a phone contract and can even affect your ability to get a job. Knowing your credit score and what is on your credit report is essential for managing personal finance.
Here are a few things to keep in mind that will keep your credit score strong.
- Pay all of your bills on time and pay as much as you can on any outstanding balance.
- Keep your balance at or below 25% of available credit. Never go above 80%.
- Stay employed. Employed people are viewed as better able to pay their bills on time.
- Check your credit report regularly to check for any errors. If you find errors, get them resolved as soon as you can.
- Don’t jump your debt around to a number of different credit cards. Being a loyal customer has its benefits. While the short term benefits may help, using this approach, in the long run, can hurt your overall credit score.
7. Increase your Monthly Income
The greatest asset you have is your ability to make money and increase your monthly income. Whether this is by getting a raise, taking on a part-time job or supplementing your income, generating more income is better than any savings account. This extra income can then be used to shore up your emergency fund or perhaps for investment purposes. Alternative income streams such as online enterprises, mutual funds or owning a rental property can bolster your monthly income by a substantial margin. The key would be to diversify your interests.
8. Invest in your Retirement
Make this a monthly or weekly habit. Investing in your future while you are young can reap great rewards when you retire. With threatened cuts to the Social Security system, you do not want to have to rely on those benefits alone for all of your needs when you retire.
Take it upon yourself to invest in your own future. Using compounded interest, within just 20 years, you can build yourself a very nice nest egg and secure your financial fitness through your retirement.
9. Saving Accounts
We have mentioned retirement accounts and emergency accounts but you should also have a high yield savings account. These accounts grow your money using compound interest and help with managing personal finance. With direct services and online banking, these amenities can make banking much easier. You can link them to your checking accounts and keep them readily available for all your needs.
10. A Will or Estate Plan
This is essential for all of us. Many of us believe that not having a large estate, we do not need a will. This is just not the case. A will tells your family and all interested parties, what you want to be done with the assets you leave behind. The assets are yours and you have the right to distribute them as you see fit. Especially if your children are young, you need a will to declare who you want to care for your children if something unforeseen should happen to you. You want your children and assets protected. Your will needs to be updated as your needs and the needs of your family change over the years.