Get Personal Finances In Order
06/21/08 Categories: Personal Finance
Before
you think about what your next investment is, make sure your
finances are in order. More people now than ever are in debt, and
deeply in it. As far as debt reduction goes; Debt should be your
number #1 priority. Get rid of it! Reduce Debt!
Start with high interest debt; debt like credit cards and store financing can have interest rates up around 26%. After working on paying off that kind of debt (even if it has to be a little at a time, maybe cutting down on eating out and shopping thrifty, etc.), the relief will come much sooner than you'd expect.
Avoid car loans if you can; paying interest on a big-ticket item that depreciates is hard to justify. Think about it. If you agree to pay 14% interest for 5 years on a new $30,000 car, you could expect to pay under $700 a month. Not too bad right? Wait, over that 5 years, you will have paid close to $42,000 for the car because of the 14% interest. On top of that, a week after you bought your car it lost 28% of it's value. That's $8,400! A week after you bought the car it was worth $21,600, and you ended up paying $42,000 for it. You have to think about other costs like gas, car insurance (auto insurance). Try to budget out the costs of your car; get auto insurance quotes and estimate gas usage before even looking for a car. With that said, try to avoid car loans.
Credit cards are a whole other bear. Some credit cards will charge 26% or more on the balance you don't pay off for each month. 26% interest can put you in the hole faster than you can say "I'm in debt". Once your balance starts to grow beyond your means, what you owe will stack up quickly. If you have credit card debt, you first have to stop spending more than you can pay for each month. Pay the balance of that month in full. Then, alot an amount of what you make each month to pay off a part of the credit card debt. If you follow that plan, you'll be fine. To add to that, no one needs a credit card; you can use your debit card just like a credit card.
The Plan to Financial Prosperity
On to more positive things, you should develop a financial plan if you haven't already.
-A good life plan to follow is 80-10-10. Make a budget following this plan, and you will retire wealthy, happy, and debt-free.
Even if you just invest in mutual funds or ETFs, your investment will grow in a compounding fashion over time (which means over time that small amount you contribute each month will turn into a huge amount). Set up a budget that dices up the pieces of your income in that fashion. The 80-10-10 is just a starting point. Living off of 80% is the maximum; if you can do 70-10-20, then by all means do it. That way you will have more room to pay for life insurance, pay off that equity loan, and cover your mortgage (home loan) easily.
Get these ideas into practice, and you will be thanking me when you retire rich and worry free.
Why Invest in Stocks?Find Out On Zecco.com Free Blogs, Forums & Trade.
www.zecco.com
Start with high interest debt; debt like credit cards and store financing can have interest rates up around 26%. After working on paying off that kind of debt (even if it has to be a little at a time, maybe cutting down on eating out and shopping thrifty, etc.), the relief will come much sooner than you'd expect.
Avoid car loans if you can; paying interest on a big-ticket item that depreciates is hard to justify. Think about it. If you agree to pay 14% interest for 5 years on a new $30,000 car, you could expect to pay under $700 a month. Not too bad right? Wait, over that 5 years, you will have paid close to $42,000 for the car because of the 14% interest. On top of that, a week after you bought your car it lost 28% of it's value. That's $8,400! A week after you bought the car it was worth $21,600, and you ended up paying $42,000 for it. You have to think about other costs like gas, car insurance (auto insurance). Try to budget out the costs of your car; get auto insurance quotes and estimate gas usage before even looking for a car. With that said, try to avoid car loans.
Credit cards are a whole other bear. Some credit cards will charge 26% or more on the balance you don't pay off for each month. 26% interest can put you in the hole faster than you can say "I'm in debt". Once your balance starts to grow beyond your means, what you owe will stack up quickly. If you have credit card debt, you first have to stop spending more than you can pay for each month. Pay the balance of that month in full. Then, alot an amount of what you make each month to pay off a part of the credit card debt. If you follow that plan, you'll be fine. To add to that, no one needs a credit card; you can use your debit card just like a credit card.
The Plan to Financial Prosperity
On to more positive things, you should develop a financial plan if you haven't already.
-A good life plan to follow is 80-10-10. Make a budget following this plan, and you will retire wealthy, happy, and debt-free.
- Learn to live off of 80% of what you make (incudes ALL expenses: food, house payments, clothes, taxes etc.).
- Give away 10%. Give it to a charity you believe in, a church you are a member of, or a family member/ friend that needs help. Not only will this help others and make you feel better about yourself, but also it will bring you connections to people that will appreciate what you're doing. Those people can bring you more business or even get you into a better job.
- The other 10% is strictly for saving and investing for retirement.
Even if you just invest in mutual funds or ETFs, your investment will grow in a compounding fashion over time (which means over time that small amount you contribute each month will turn into a huge amount). Set up a budget that dices up the pieces of your income in that fashion. The 80-10-10 is just a starting point. Living off of 80% is the maximum; if you can do 70-10-20, then by all means do it. That way you will have more room to pay for life insurance, pay off that equity loan, and cover your mortgage (home loan) easily.
Get these ideas into practice, and you will be thanking me when you retire rich and worry free.
Why Invest in Stocks?Find Out On Zecco.com Free Blogs, Forums & Trade.
www.zecco.com
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