Do you feel overwhelmed by financial decisions? Getting back to basics can help you maximize the power of your income. Try these tips:
- Start an emergency savings account. Car repairs, medical emergencies, and last-minute necessities are all budget busters. Having an emergency savings account that is separate from your primary savings may help you weather unexpected events.
- Create a budget. A good way to break down your budget is to divide your income so that:
- 50% goes to essentials
- 20% goes to debt repayment and savings
- 30% goes to non-essential items, entertainment, and an emergency fund
- If your budget is too far out of balance, it may be time to reconsider your spending habits.
- Save for retirement. Take advantage of employer-sponsored savings plans, especially if you are offered an employer match. (If this isn’t available, consider opening an IRA.) Remember, the money you put away is pre-tax, which means it could decrease your annual tax bill. It’s like paying yourself!
- Track interest rates. Rates on credit card and other unsecured debt may increase when interest rates rise. This makes the debt you carry more expensive. If you are unable to pay off unsecured debt right away, look for a low-rate balance transfer card or consider taking out a personal loan.
- Set financial goals. Creating short, medium, and long-term financial goals will help you achieve your dreams. Setting goals also helps with establishing good savings habits, both now and in the future.
- Appreciate what you have. It can be easy to get caught up in the trap of wanting “more” or “better.” Instead, focus on enjoying what you have. Find creative ways to make the most of the resources available to you. If you are feeling bored or restless, look for free or low-cost ways to expand your horizons.