Even if you have a college degree, it’s more than likely that you’ve never been educated about managing your personal finances. If you’re like the majority of readers out there, you probably have a few credit cards, a car lease or loan, and a property rental or home loan. If just the thought of mounting bills and paperwork is starting to make you sweat, keep calm and read on.
To help you get a handle on your personal finances, today we’re tapping into the knowledge of financial experts about ways we can earn more money, spend more wisely, and save more (for a rainy day, a dream vacation, or a golden retirement).
The Financial Experts’ Guide To Managing Personal Finances
From finding easy ways to boost your income and learning about your FICO score (which has a major impact on your loan interest rates and can either help or hinder your ability to get a mortgage) to figuring out how to set-up a monthly budget (to help you stay on track with your spending and saving habits), featured in today’s lifestyle guide are financial experts’ tips on how to manage personal finances.
Tip # 1: Make a Budget (or Spending Plan)
Giana C. Armano (a Financial Advisor at Flagship Private Wealth in the Boston region) says, “Understand where your paycheck is going. Divide your spending between fixed expenses: such as housing & utilities, and discretionary expenses: such as dining out & entertainment. Once those are separated it is easier to see where you can potentially cut back on some of your (unnecessary) discretionary spending. You want to do your best to allocate your income to be in-line with your financial goals.”
Ash Exantus (a best-selling personal finance Author and a Financial Empowerment Coach at BankMobile in New York City) agrees, saying, “As the saying goes, If you don’t know where you are going, then any road will get you there. This is a simple idiom that suggests only those who are focused on their destination and plan purposefully will actually get there. Establishing a budget will put you on the right path to saving for retirement because it will give you real-time information into how much you can possibly save and what adjustments may need to be made, if any.”
Tip # 2: Automate Your Savings
Personal finance guru and best-selling author of The Automatic Millionaire, David Bach, calls it “paying yourself first.” This concept essentially means that you should take a portion of your paycheck and put it away into savings, before paying your bills or buying things.
Jacob W. Parish (a Financial Advisor at Schooner Financial Assoc. in Scottsdale, Arizona) agrees with this concept, saying, “It’s easy to do these days. Set an amount you want to save and have it moved from your checking account to your savings or investment account on the same day every month. It’s the simplest way to start building wealth.”
Tip # 3: Pay Down Credit Cards
While some financial experts will say that you should discontinue using credit cards (as they often encourage you to mindlessly buy items you don’t need or can’t afford, resulting in mounting credit card debt), the upside of using credit cards wisely is that it can help you improve your FICO score. That’s why it benefits you to pay down credit card balances and get rid of those high interest charges.
Jaycob Arbogast (a Financial Planner & Investment Adviser at Arbogast Advisers LLC in Chico, California) says, “One place where people often lose money is through interest on their debts. Every month that you carry a balance on your credit card, student loans, or your mortgage, you’re paying extra money to the bank in the form of interest. Cutting back those interest payments is going to save you a lot of money over the course of a year.”
Tip # 4: Lower Your Home Costs
Owning a home is the American Dream. But, along with buying real estate comes additional financial responsibilities. From property maintenance and improvements to renovation costs, being a homeowner can sometimes make you feel like your home owns you, rather than the other way around.
To lower your home costs (or at least, to help you stay on budget – as outlined in Tip # 1), John Bodrozic (Co-Founder of HomeZada) says that using an online platform (like his company) that provides personal finance solutions can “help save money on maintenance, monthly utility bills, (and) home remodel project(s) on an going basis. And it can help maximize the value of the home in the future when you decide to sell it.”
Another way to lower your home costs (by getting you a better interest rate) is through refinancing your home loan. James M. Molinaro, III (a Mortgage Loan Officer at Woodbridge Financial in Monterey, California) says that “refinancing a home loan allows existing homeowners to take advantage of current market programs and rates. If you’re a homeowner, this enables you to lower your monthly payment or pay-off your home sooner, which could save you tens of thousands of dollars in interest payments. Another advantage of refinancing, is that any costs associated with the refinancing process are generally absorbed by the lender. As a homeowner, you should always be in contact with a mortgage loan professional, to ensure that you’re getting the best rates possible.”
Tip # 5: Start Investing (Early!)
Whether you’re 20 or 40, you’re never too young to start investing in your future. From investing in a retirement account to buying mutual funds and individual stocks, working with a financial advisor is the first step toward being a smart and savvy investor.
When it comes to wealth-building (thanks to the concept of compounding), time is money, which is is why you need to start investing sooner, rather than later. Nick Vail (Co-Founder & Financial Advisor at Integrity Wealth Advisors in Indianapolis, Indiana) exclaims, “Do not put saving retirement on the backburner. It needs to be prioritized early and often. Far too many people wait far too long to start saving for retirement.”
To help you get started, Sally Brandon (Vice President of Client Services at Rebalance IRA in Palo Alto, California) suggests, “if you work and your company offers a 401(k), take advantage of it to start maximizing your savings. Find out what the matching policy is and consider at least meeting that goal. That’s tax-free money! Yet many women work for small businesses that have little to offer their employees. If your company doesn’t have a plan, consider opening a traditional IRA and a Roth IRA, put aside more money every month and make your own contributions. I’m a big proponent of automated savings. You can arrange it so that the money goes right into savings before.”
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[This article is for informational purposes only. Consult with a financial expert before making any investment or banking-related decisions.]