How to know when to save, where to save, and everything in between
Everyone has an opinion on how to handle finances. The key is to organize and prioritize what works best for your family, but there are categories you won’t want to fall through the cracks. Here are some tips on how to organize your finances by prioritizing.
Begin with the end in mind. When you’re working 8-5 every day, it seems like retirement is forever away. Within the blink of an eye, though, you’ll be there before you know it, and you’ll want to be prepared. The earlier you begin saving, the better. A general rule of thumb is to invest between 10-15% of your gross income at a minimum. A quick way to organize this is to have the desired amount drafted from your paycheck before it even hits your bank account. This way you can budget accordingly without having to worry.
They say you can never fully prepare for an emergency, but having accessible funds on-hand can eliminate a lot of stress should a dire situation arise. A general rule of thumb is to keep 3-5 months of your salary in a savings account should something arise.
Whether it’s a credit card, student loan, car payments, and anything in between, getting rid of debt should always be a high priority. Because of interest rates, postponing paying off debt is quite literally very costly. Set an amount to be drafted monthly, and stick to it. When you have a little extra to give, send the amount to the account that you can pay off most quickly.
Create a Budget
It may sound simple, but put pen to paper (or mouse to spreadsheet) to find out your recurring fixed expenses (mortgage/rent, car payments, utility bill, car insurance, etc) as well as your flexible expenses (health and wellness, groceries, entertainment, gifts, maintenance, clothing). Once you create a budget, stick to it. If having a card in your pocket is temptation, work on a cash-based system.
If you have an eye on an upcoming vacation or a new couch, set a goal for a date and amount and put your extra money toward those. Life is more than just going to work and paying bills. Treat yourself to something to give yourself an exciting event or item to look forward to.