Whether you are getting started on your own or have a lot of life experience, it is important to get back to the basics and make sure you have your financial house in order. Sometimes people think that this is advice is only for young individuals who are newly on their own, but truth be told, everyone can benefit from revisiting the basics. Life’s circumstances are constantly changing and without being prepared, unexpected surprises can throw you off course. By taking the right steps and establishing a firm foundation, you can navigate these challenges more effectively, and have a greater peace of mind. We’ve compiled some steps to help you create a strong financial foundation.
Maintain an Emergency Fund Savings Account
Having enough money saved to cover 3-6 months of your household’s total monthly expenses is an important step in building your foundation. Many people are only a few missed pay checks away from financial ruin. Without a little extra money to fall back on, a job loss, illness or an unexpected expense such as a medical bill or a car repair could send you into a financial tailspin. Since these situations are urgent in nature, without an emergency savings, you may find yourself using a credit card to deal with these situations and you may not be able to pay off the bill when the statement comes. Maintaining an emergency fund will help you to deal with the unexpected.
Pay Off High Interest Rate Debt and Credit Cards
Of course, it is best to never take on unnecessary debt, but life happens and sometimes you just need to use credit cards. If you find yourself with credit cards balances that carry high interest rates it is best to pay these off as soon as possible. In most instances it works best to use credit cards for basic monthly purchases that you can pay off at the end of each month. Carrying a balance month-over-month on credit cards ends up costing you way more in the long run.
If you are feeling overwhelmed by your current balances, consider making a list from smallest to largest. Pay the smallest off first, and when that account is paid in full, increase the amount you are paying on the next smallest debt. This process is called the “snowball” method. The snowball method provides satisfaction by seeing smaller debts paid off quickly. Mentally, this provides encouragement to continue with the process.
Make The Most of Your Employer’s Retirement Benefits
It is important to know how your retirement benefits offered by your employer work. Consider contributing enough to take full advantage of any match your employer may offer. For example, if your employer offers a dollar for dollar match up to 5% of your income and you save 5% of your income, your employer will put another 5% into your account. In this example, if you only contributed 3% you are leaving free money on the table.
Set Clear Goals and Speak with A Financial Planner and Tax Professional For Guidance In Achieving Those Goals
What are your goals and how will you accomplish them? As you are building your foundation it is helpful to know where you want to end up. Do you want to save for your kids’ education expenses? Do you want to retire early? Are you hoping to purchase a home? How can you manage your income to maximize its use? Goals are more easily accomplished when you have clarity about what you want to accomplish and have a plan on how you will do it. Sometimes people think that you need to have to have a lot of money already saved to benefit from meeting with financial professionals. This is not always the case. Doing this early in your life can help you to prepare for all the decisions that will come your way as your wealth begins to grow.
There is no better time than now to either establish your financial foundation or to revisit your existing foundation.
Investment Advisor Representative
Ashley graduated from Winona State University with a Bachelor of Science in Business Administration. In 2005, she joined Advisors Management Group part-time as a part of the Administration team. After leaving AMG temporarily, she returned to Advisors Management Group full time in 2015 and became an Investment Advisor Representative and Tax Preparer in 2019.
Advisors Management Group, Inc. is a registered investment adviser whose principal office is located in Wisconsin. Opinions expressed are those of AMG and are subject to change, not guaranteed, and should not be considered recommendations to buy or sell any security. Past performance is no guarantee of future returns, and investing involves multiple risks, including, but not limited to, the risk of permanent losses. Please do not send orders via e-mail as they are not binding and cannot be acted upon. Please be advised it remains the responsibility of our clients to inform AMG of any changes in their investment objectives and/or financial situation. This commentary is limited to the dissemination of general information pertaining to AMG’s investment advisory/management services. Any subsequent, direct communication by AMG with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.