There’s just something about a fresh start. Maybe that’s why so many people start looking for ways to get their financial house in order as a new year approaches. We’ve compiled some finance tips to help you create a plan for success in 2021.
This may be the single most challenging thing for people to accomplish. First, determine how much money you bring in each month. Then decide how it will be spent. Be sure to pay yourself first by putting a set amount in savings each month. Make sure you’ve budgeted enough to cover your debt payments as well as living expenses like food, transportation, and clothing. Various budgeting apps are available to help you track your savings and spending.
Just because you can borrow money doesn’t mean you should. Make sure your debt load is manageable and doesn’t take up too much of your monthly income. Your total monthly debt load should be less than 36 percent of your pre-tax income. That includes mortgage, auto loans, and credit card payments. Speaking of credit cards, try to avoid using high-interest credit cards unless you pay off the full amount every month. Otherwise, the cost of using these products adds up quickly.
It may seem like years down the road, but you must start planning now for retirement. If your employer offers a 401K or similar program, enroll today. If a company match is provided, be sure you contribute enough to get the most significant impact. For example, if your employer matches your contribution up to 4 percent, you should contribute at least 4 percent so you can get a total 401K contribution of 8 percent. If your employer doesn’t offer a plan like this, a financial advisor can help you set up retirement savings products.
The best budgets are often wrecked by unexpected expenses. Car trouble or a hefty dental bill often forces people to use high-interest credit cards or miss loan payments. Plan for this contingency by establishing a rainy day fund for emergencies. You don’t have to put a lot into the account, but having something to fall back on will help you better manage your finances.
Paying off your debt is key to building wealth. Focus first on the debts with the highest interest rates. These are usually credit cards and unsecured loans. If you have a significant amount of high-interest debt, inquire about restructuring it. Or, if you own your house, a home equity loan could result in lower interest and lower monthly payments.
No matter where you are in your financial journey, Greenberg Financial Group is ready to help. Contact us today for more finance tips or to let us help you craft a plan that supports your goals and provides security for the future.
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