Planning your finances for the future is highly important as it guarantees that you have something to fall back on if something should go wrong or if you want to retire (which most of us do). Here are 5 steps to help you get your finances in order:
1) Budget Your Money – The first thing you need to do to set your finances is become acutely aware of all your expenses, and in order to do this you must set a budget. I find it easiest to set up a budget month per month rather than pay check to pay check as unexpected expenses can often come up in one week and not the other. Simply calculate exactly how much you make per month and then allocate an appropriate amount to your bills.
2) Pay Bills – After you’ve budgeted your money it is important to get into the habit of paying your bills on time (if you haven’t already been doing so). If you are constantly late paying your bills, it could drastically affect your credit score.
3) Credit Score – Be sure you not only know what your credit score is, but you monitor it on a regular basis (every month or every couple months). It is important to know exactly where you’re at and dispute anything which may be wrong and may be bringing your credit down (this happens more often than you think).
4) Save for the Future – Now that you’ve gotten the here and now part down, it’s time to start thinking about your financial future. Do you have enough saved up for retirement? Do you have an education fund for your children? How about an emergency fund in case things don’t turn out quite as planned? Try putting in a small amount of money into each fund that you need. As long as you’re consistent, it will add up over time.
5) Pay Down Your Debt – Paying down your debt is super important. Not only does a high debt negatively impact your credit score, but you can end up paying thousands of dollars in interest over many years. If you have debt, pay off as much as you can as quickly as you can and once again, never be late for your payments. Many people ask if they have a lot of debt, should they pay it off first or save up some money first and the answer is quite simple. Pay down as much as you can but put away a small portion of your pay check into your savings/retirement funds. For example, delegate 5% of each pay check to savings and as much as you can towards your debt. This way your debt will be going down (therefore paying less interest) and your long term savings will be steadily growing.