Often times people get caught up in intricate ways of making, saving, and spending money. They think skipping the latteâ€™s, or getting a second job is the only way to get ahead or dig yourself out of a financial rut. Sometimes the truth is much simpler, but perhaps more painful than you would like. Let me provide you with a simplified financial checklist that will give you the first step to fiscal security and peace of mind.
Donâ€™t have one? Well this is the most important aspect of financial security for any household. This is your personal business plan that will outline your strategy for managing spending, cashflow, and staying away from all that nasty consumer debt that so many find themselves entrenched in. You need to determine how much cash your bring in, how much is going out the door, and how much you have leftover to save. I hope that savings equates to at least 25% of your take home pay, but if it doesnâ€™t, at least you now have visibility to what that number is. You need to plan everything down to the monthly ADT costs for your home security.
Everyone should have at least one savings, and one checking account. Itâ€™s quite simple, you need to save money, and you need to pay bills. Each account should be for one of those two needs, and nothing else. I highly recommend carrying a third account, and that one should be for your spending money. It offers clarity and simplicity for organizing your money and sticking to the cardinal rule, spend less than you earn.
This is another absolute must for everyone! Forget the brick and mortar investment chains, and open up a low cost online brokerage account. Donâ€™t fall victim to inflation, itâ€™s nice to have the safety net of a low risk savings account, but you can sock away all of your extra cash there. Allocate a fixed monthly amount of money to this account, and invest it in meaningful chunks to a safe and proven dividend paying stock.
Running your credit report isnâ€™t a new concept, but itâ€™s still one that people often overlook. With the high rate of identity theft in the digital age you never know when someone might be using your available credit to their benefit. Try and run your report once a year, it will give you peace of mind, and the ability to correct any possible errors. After all, your credit score is the cornerstone of your finances, and can effect everything from car insurance to credit card rates.
Donâ€™t have any of it!!! OK, I understand that is easier said then done, and you may already have racked up your fair share. Some types of debt like student loans, and mortgages, can be lifetime investments for your future. Iâ€™m not advocating taking on any forms of debt, but these types tend to be less harmful than other forms of consumer debt. Credit cards can actually work in your favor when they are paid each month in full, in fact, I often use my credit card reward points for items I wouldâ€™ve otherwise purchased with cash. However, leaving a monthly balance creates a burden of interest, and eats away at your available cash.