Every financial plan starts with creating a household budget that allows you to pay your monthly bills on time. Your budget should also leave you enough disposable cash each month for entertainment, savings, and investments. Once you have created an actionable budget, you can use these steps to create a plan for your financial future.
Maintain Good Credit
The next step in maintaining good financial health is to maintain good credit. If you have poor credit or no credit history, you can still follow these same steps. This process includes making sure every monthly bill is paid on time. In addition to hurting your credit, a late payment will put you further in debt by adding late fees, interest, and penalties to what you already owe. If you don’t have a credit card, a secured card will help you build credit gradually.
Pay Off Your Debts
Your next step should be to start paying off your debt. The most popular method is the snowball strategy, which involves paying off the smallest creditors first. This provides you with increasingly more disposable income, which can be used to pay off larger debts faster. Another alternative is to pay off the debts with the highest interest first. While this method takes longer, it does provide the benefit of limiting the amount of new debt you will accrue.
Start Building Your Savings
Once your debts have been paid off, you can use that disposable income to build up your savings. You should divide your disposable income between two accounts. The first should be a savings account that’s reserved for financial emergencies and big-ticket purchases. This will keep you from having to use credit as frequently. The second portion of your savings should be contributed to an IRA. If your employer offers a 401k program, you should invest in that as well. An investment advisor can help you meet your retirement goals.
Keep in mind that financial emergencies may happen before you’re prepared to deal with them. You should expect to make mistakes that can challenge you in achieving your financial goals. When these hiccups do occur, deal with them to the best of your ability and resume your financial strategy. As long as you continue to work towards your goals, you can still achieve good financial health.
“Some information on this website was written by BrandYourself, a non-affiliate of Cetera Advisors LLC”