Monday, June 27, 2011, AM | 1 Comment
Millions of folks have failed to have a budget. Even if they ever did they failed to follow it through in their financial lives. However, when they face financial hardship, they blame someone else for their failure. They very seldom blame their lack of preparedness resulting in no savings or minimal at best. For them, saving for retirement is a waste of money. They rather spend that money now than save it for retirement especially when you are young and years away when you quit working for good.
Little do they know that they would need money the most in retirement when they might be unable to continue working. Those days are gone when Social Security and pension were the sole and good income source in their hour of need. Pension plans are increasingly diminishing in many companies. We all know SS has problems.
Therefore, you need to plan for your finances. Consider the following steps to take, not necessarily in the same order:
Organized your records
If you really want to save money and time, you need to organize all your records. It will reduce stress and anxiety in your life all year long. You would always be on top of your finances.
Have money in reserve
Experts suggest you need to have four to six month’s living expenses in case your source of income gets disrupted. It will help you relieve financial anxiety. What you can do is set up an automatic and recurring transfer to your savings account. Over the years, the fund will grow, and you may not even miss the transferred money because you would get used to the remaining in your checking account for your expenses.
Start paying down high-interest debt
If you are carrying over balances and paying interest from month to month, you need to cut down on your card use. You need to pay more than the monthly minimum. You might be able to find a different credit card with a lower interest rate.
Have household budget
Before you develop a budget, you need to analyze your income and expenses. Once you understand how you spend money, you may be able to lower your expenses. Some folks use financial management software, like Quicken or Money. Many use them for a couple of months and then they quit using them. If you are organizing type by nature, you might be able to follow it through all your life. It helps to save money and time.
Start or increase saving for retirement
Your retirement lifestyle will definitely be different than it is now. If you want to have at least 80% of your present monthly income in retirement, then you must take full advantage of your 401(k) or other employer-sponsored retirement plan. Start participating in the plan if you are not already doing. Increase your contributions as much as you can. You should also try to get any available employer match. Then consider contributions to an IRA or Roth IRA to enhance your retirement plans..
Be always aware of taxes
Like President Obama once said “Nobody likes to pay taxes.” But because we must, whatever income we have, we must be frequently aware of taxes. Keep good records of potential deductions like mortgage interest, state and local taxes, charitable contributions, and certain medical expenses. Also, take advantage of tax deferral or preferential tax treatments on your investments. Consider using tools like Turbo Tax Online to make filing your taxes as quick, easy, and accurate as possible.
Have good and sensible strategy for investment
When you start investing, you may want to follow two major paths: Diversification and dollar-cost averaging. Many folks buy high because they are anxious to buy and sell low because they panic. Anxiety and panic will put you on the path of financial destruction. You can take risks when you are young. You should play it safe when close to retirement. Investment of any kind involves risk, and as the saying goes, past performance is no guarantee of future results.
Have adequate insurance for future protection
Insurance provides protection against the unknown and that can always happen often times without warning. Make sure your possessions, life and health are adequately insured. Review your coverage amounts and deductibles at least once a year. Besides you may want to consider an umbrella liability policy for additional coverage.
Make estate planning your finance strategy
A well thought out estate planning can reduce taxes for your loved ones. There are two important documents involved here: Durable power of attorney and healthcare. These two important documents can help you in case you are incapable of making decisions on your own.
In a Nutshell
Being prepared by planning for your financial life will not only relieve you from headaches in future but will do the same for your loved when you are deleted from the big disk of life.