If you struggle with money, the thought of your financial future may be daunting. How can you build better finances for tomorrow when you’re cash-strapped today? The fact is that even small actions now can make a big difference later. Plus, the sooner you start, the sooner you’ll be on track to getting where you want to be money-wise. 561Levon-Finance provides actionable tips on finance and investing. Read on for some pointers.
Create a budget
A comprehensive budget is at the heart of any savvy personal finance plan. To make your own, start by tallying up all of your income and expenses. You can then see where you can cut costs. This also allows you to set priorities regarding where to divert your extra cash—for example, to pay off debts, to save, or to invest. After you’ve made your budget, stick to it with the help of expense tracking apps like Expensify or Wally.
Pay off your debts
From student loans to a mortgage, you may have multiple debts. So, which one should you pay off first? Equifax describes some approaches to debt. For example, you might start by paying the highest interest debt first. Another option is to use a snowball plan, focusing on paying the smallest balance of your debts each period. Once the one debt is paid, you can then take the money you were putting towards it and roll it into another debt payment.
Get a handle on your credit
Your credit rating helps to determine your eligibility for future loans, from home loans to car loans and more. You want to maintain a strong credit score, just in case you need to take out a line of credit. You can get a free credit report once per year to check your score and see how you’re doing. This also lets you identify errors in your credit report and dispute them.
Start investing your money
By investing, you allow your money to grow over time. There are many ways to invest, from bonds to mutual funds and stocks. Exactly where you should put your money depends on your goals. CNBC explains that investing goals are usually classified as immediate term, short term, medium term, and long term. For example, when investing for retirement, it’s advisable to put at least 90% into stocks. If you’re new to investing, seek professional help.
Consider real estate investments
Real estate is another savvy option for investing and a great way to diversify your portfolio. RedFin explains common options like investing in rental properties, fixing and flipping properties, or setting up real estate investment trusts. Examine the pros and cons of each option and consider where your interests lie before going ahead.
Set aside an emergency fund
While it’s smart to invest your money wisely, you should always keep a small emergency fund on hand. The Balance recommends keeping at least three to six months of living expenses on hand. This way, if unexpected costs arise, you can tap into your fund instead of turning to credit, which will saddle you with the added expense of interest.
Educate yourself about financial matters
Financial markets are constantly evolving and it’s important to keep up with changes over time. Cryptocurrencies are a great example of how innovation can impact the markets and influence investing. Stay up-to-date on the latest finance information by reading the news, following relevant blogs, and listening to podcasts. The more info you have, the better.
Starting to think about your financial future can be daunting, especially if you’re currently saddled with a lot of debt or bad credit. However, this is the first step in building a brighter financial future for yourself—and well worth it.
By: Carla Lopez of boomerbiz.org
For more content on investing and smart finances, visit the 561Levon-Finance blog.