No matter which way you look at it, who you ask, or always hear “money does not buy everything”, well, it certainly does, and if you have it, good for you, but if you don’t, then you can feel the financial burden fall solely on your shoulders until you get the feeling of sinking deeper and deeper. For the sake of you, your family, and your financial future, of which you can protect by striving for a few financial goals, and the timing could not be any more perfect than now.
Get Out of Debt (and Stay out!)
In order to get anywhere ahead in life, you need to avoid spending money on paying back what you already owe, not to mention the interest on top of that. Having a mortgage is one thing, as most do not have hundreds of thousands of dollars laying around that you can pay cash for a home purchase, so paying back 4% interest on a mortgage is not a deal breaker, but there should be an end in sight, pushing for a 15 year terms instead of 30. Credit cards are where you will feel the biggest hurt, as some cards can be upwards of 15% APR, so depending on your balance, unless you are making huge payments each month, you will never chip away at the balance to pay off. Once you are out of debt, make sure you stay out.
Almost going hand in hand with staying out of debt is to curb spending. Even if you are not going further into debt each month and are actually coming out even or ahead, you are on the right track, so to further curb spending will only leave you with more left at the end of the month. Cutting corners such as avoid eating out at restaurants and instead go grocery shopping and prepare dinner at home is a great place to start. Even alcohol; although it is nice to get out and have a few drinks with friends, if this is a regular occurrence, you can probably buy enough to entertain your guest for the night at home than what it would cost for a couple rounds at the bar.
Continually Increase Retirement Contributions
First off, if you are not currently contributing to retirement you need to start now, because the older you get, the closer you get to retirement, and less of earning compound interest on those missing funds. A good place to start is if your company offers matching 401(k) contributions, you should at least match those, as otherwise you could be missing out on a few thousand given free to your account each year. Once you have start to see your account start to build, you should begin to increase a little each year, so one, you will not notice a small increase missing, and two, every little bit of contribution helps in the long run.
Keep an Emergency Fund, but Not Too Much
I think all expert agree that you should keep some available cash for easy access for emergencies, but the amount is debatable. You never know when your car will need a repair, or you all of a sudden have water damage in your home after a bad rain, you want to avoid putting on a credit card, because if you do not have the money now, you will have to charge a pay back in installments with interest, messing up any monthly budget you have. If you have at least three to six months’ worth of monthly expenses available, you can use this for a rainy day, so to speak. The criticism is that if you keep too much, it is not growing over time and could be best used in say, a brokerage account, so decide with your family how much is important to keep handy.
Maximize Tax Write-offs
If you owe taxes or get a refund already, wouldn’t you want to pay the least amount you possibly can? One way to ease your tax burden a bit is to write off items such as charitable donations. While I commend you for giving back, I would be lying if there was not a tax benefit. Not only are any cash donations deductible, but also are the items that you can gather up around your house and give to the Salvation Army or Purple Heart. Clothes, furniture, electronics, kitchen items can all be donated, if you keep good track, and are able to provide a receipt for the proof of donation.