6 Finance Tips to Set Yourself Up for Success
Money isn’t everything, but you can’t ignore its importance and the security it provides. Money management and planning early on go a long way in giving you financial freedom and comfort in the future. While there isn’t a one-size-fits-all solution for making more money or retiring in the lap or luxury, there are some easy steps you can take to set yourself up for financial success now and long-term.
- Determine what financial success means to you.
It would be great to be a multi-millionaire, but that’s not always feasible or even necessary for everyone. Plenty of people feel comfortable with what they have. Financial success is determined by a mix of personal comfort, security, free time and peace of mind.
Instead of putting a number on how much you want in your Checking Account, set up financial milestones. This could be as small as saving up for a vacation or as big as saving up for college for your kids, purchasing a home or paying off all your student loan debt by a certain age. A milestone helps you plan ahead with enough flexibility to account for life changes.
- Save for retirement.
It’s never too early to start saving for retirement with a Mission Fed IRA or 401(k), especially if you’re young. Time passes quicker than you think, and your money can accrue during that time. By the time you retire, you’ll have a comfortable nest egg to fall back on.
As a general rule of thumb, you should put away about 10 percent of your income and aim to increase it up to 15 or 20 percent as your career progresses. And if you work for an employer like Mission Fed, you could have a 401(k) match program. If you do work for an employer who offers a match, try your best to maximize that match—it’s basically free money for your future!
- Prepare for emergencies.
From car troubles to sudden illnesses to home repairs, emergencies happen, and you should have some funds available to make sure you’re prepared for the worst. Start by saving at least $1,000, then increase that to three to six months your net pay. That might seem overwhelming, but you’ll thank yourself when something comes up. Keep your emergency funds in a Money Market Account or your credit union savings account.
Along with emergency savings, consider signing up for life insurance and creating a will, especially if you have a spouse, kids or others who depend on your support.
- Set a monthly budget.
Overspending is the biggest problem with most people. You should be getting more money than you spend each month. Start by subtracting your monthly fixed expenses (rent, bills, loan payments, etc.). Then see how much you have left to spend on food, clothing and entertainment.
You should have enough to be comfortable, along with some savings and emergency funds. If you’re coming up empty or negative, you may want to reevaluate your living costs and spending habits. And if you need help figuring out where to start with your new savings plan, we’re here to help with our “How Much Should I Be Saving?” infographic, where we offer some ideas for what to save for and how much you should aim for.
- Take care of your debt.
Make a list of all your debt, including student loans, credit cards and car loans. Take into account the total amount you owe, the minimum payments allowed and the interest rates of each loan. Looking at your monthly budget, determine what you can feasibly pay to pay down the debt. Start with the debt that has the highest interest rate and pay the minimums on the rest. Once you’ve completely paid off that loan, move on to the loan with the second highest interest rate and so on until you’ve taken care of them all.
While you’re paying off your debt, it’s important to not acquire more debt. Make sure your monthly debt payments leave you with enough money to live comfortably, meet all of your expenses and put money aside for emergencies and must-haves.
- Diversify your investments.
Along with your emergency funds and your retirement plan, consider other potential investments. Common stocks are the most popular with beginning investors. They’re easy to buy and sell, and stock prices are easy to find. More experienced investors may want to consider real estate. It can be more expensive to buy and sell and harder to turn into actual cash, but real estate comes with special tax benefits and can be highly lucrative.
Remember that all of this begins with figuring out your financial goals. Create some guidelines for yourself that you can see yourself fulfilling immediately, and have some milestones set so you have something to look forward to in the future.
The content provided in this blog consists of the opinions and ideas of the author alone and should be used for informational purposes only. Mission Federal Credit Union disclaims any liability for decisions you make based on the information provided. References to any specific commercial products, processes, or services, or the use of any trade, firm, or corporation name in this article by Mission Federal Credit Union is for the information and convenience of its readers and does not constitute endorsement, control or warranty by Mission Federal Credit Union.
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