5 Things to Start Doing Today to Maximize Your Future Finances
Dealing with your finances can be challenging and many people do not have a good handle on how to prepare for the future. There are some steps that you can take — right now — to get ready for the future and may help you retire early.
Create (and Stick to) a Budget
You should calculate your regular monthly income and your regular monthly expenses to set up your monthly budget. This includes items that you need like rent, food, loan payments, or insurance premiums; needs should come first before any luxuries. You can then figure out how much is left over at the end of the month. If your expenses are higher than your income, decide which expenses can be reduced to get your finances back on track.
Save for a Rainy Day
If you have any extra money each month, you should put some of it aside for a rainy day. While you do need to start saving for your retirement, you should also save some money for emergencies. You need to save enough money to cover between three and six months of monthly expenses – just in case. This allows you to avoid dipping into your retirement fund. Once you have your emergency fund, you can start sending money to your retirement funds.
Be Careful with Your Credit Card
Credit is a fun thing but when it is time to pay it back, it can be an ugly occasion. When you apply for a credit card, you should do some research to make sure you pick the best card. Make sure you are clear about the interest rates, any annual fees, grace periods, and other charges that may be associated with the card. Once you get the card, add your monthly payment into your budget and only charge what you can afford to pay each month. This keeps your credit rating high and allows you to focus on the overall financial picture.
Look for Tax Advantages
A traditional 401(k) offers tax advantages; you can defer the income taxes on the money you contribute to your 401(k). If you are a worker whose income under a specific threshold, you may also be able to claim the saver’s tax credit. There may be other tax benefits that you are eligible for as you plan for your retirement; you can learn about other ways to maximize your return with the help of financial experts like Mark Weinberger.
Maximize Your 401K’s Savings
Since most people do not have pensions, it is important to make the most of your 401(k) or – if your employer does not offer 401(k)s – IRA. Make sure you save as much as you comfortably can each month in your account and get any available match that may be offered by your employer. Make sure your investments are diversified so that a crash in one area won’t wipe you out completely. The most important point to help secure your financial future is to NOT cash out. Cashing out of your 401(k) or IRA early puts a crimp in your retirement plans and costs you a significant amount of money in fines and penalties.
Successfully managing your finances allows you to plan for a comfortable retirement. If you work aggressively, you may be able to cash in your chips earlier than you expected.
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Category: Financial Planning
