- Take action: Aim for these financial goals
- Pay off all debt except your mortgage (and pay that off too, if you have the cash funds). If you have multiple sources of debt, either start paying down the debt with the highest interest rate first, or pay off the smallest debt amount first. Sometimes paying off a smaller, nagging bill gives you a psychological boost, and the drive to keep going. It can take years (or more) to get out of debt. Stick with it.
- Create an emergency savings fund with up to six months of living expenses. This is strictly for emergencies, so if you have an unexpected expense, you must adjust your monthly budget the next month and keep saving until you replenish the money.
- Purchase a life insurance policy in an amount that will keep your family comfortable for at least six months to one year.
- Set up a retirement account and aim to contribute 15% of your salary.
Each month, contribute to your retirement account, savings account, and pay down debt first. Then spend what’s left, according to how you budgeted for the month. Automate where you can – if you never see the money, it’s harder to miss. And the less you have to think about setting money aside, the easier it will be. Focus on conserving your willpower for other decisions. Life is short, and you don’t need to spend a lot of time each month organizing your finances.
- Stay focused and positive
Getting your finances in order is not easy; it’s a process. Don’t expect immediate results and be realistic about how quickly you can build up your savings. If you are in over your head, hire a professional to help you get organized and provide accountability. A financial planner can also help you set up and maintain retirement plans or college savings plans for your children.
- Review your plan annually
Things change. Make a calendar appointment to review your finances at the same time every year and incorporate any life-changing events. Taking the time to make minor tweaks annually will keep you on track without being an overwhelming chore. Tracking your progress can also be very uplifting. It’s rewarding to see how far you have come in one year’s time.
Managing your finances is a task that never ends. But controlling your money will ensure that it doesn’t control you. And that’s a lesson worth every penny.
