Getting your money checklist in order is a critical part of your financial planning journey. People often stress about basic financial decisions. Even the most basic financial decisions can affect your personal credit score. Without proper planning, you might have difficulty when you apply for a loan or search for a new insurance quote.
It’s easy to avoid common pitfalls that people often make by following our guidelines and treating your personal finances with an increased level of responsibility. Below are some helpful tips to get yourself started.
Start an emergency fund
One of the first things you should do when preparing your money checklist is prepare an emergency savings fund. It’s important to start an emergency savings fund in case of unforeseen circumstances. Whether you run into car trouble, get sick or injured, emergency funds can be helpful to help pay for certain scenarios.
To maximize your emergency fund, it will help to manage this money in a high-yield savings account. This will enable you to earn more money in the bank while you do not need it. To be safe, it is recommended to have up to 6 months of living expenses saved up in your emergency fund. It is best not to touch your emergency savings account under any circumstances unless it is an emergency.
Your money checklist – Get rid of debt
Most Americans find themselves suffocating in debt that restricts different loans they can qualify for. Student loan debt has grown into a massive problem for most Americans in the United States. Not everyone can qualify for a scholarship so it is understandable why student loans are so necessary. Loans sit on students’ shoulders the day they walk to collect their diploma.
Student loans can haunt recent college graduate students as the interest piles up on the principle loan amount every day. Education is a good thing. However make sure you understand the enormous debt amounts and high-interest rates you are inheriting from committing to a university without a plan in place to pay it back.
Make a plan to pay it back
While you might crave a new car, an apartment of your own and independence from your parents, your student loans are going to hold you back for years if you do not take care of it quickly.
Instead of paying off the minimum amount, you want to take care of your loan payments with as much money as you can afford to speed up the payment process.
The more you pay towards your loans, the sooner you move towards reaching freedom of any student loan debt. You will be tempted to reduce your monthly payments so you can enjoy a bit more cash spend. Although it is tempting, you are better off to bite the bullet and continue to use your money towards paying off any outstanding student loans.
Consolidate your debt to reduce your payments
One helpful strategy people like to do is consolidate outstanding debts with certain financial providers. Consolidating credit card debts into a single payment can help benefit your credit score in the long run along with simplify your monthly outgoing payments. There are many different options to choose from when deciding who to trust with consolidating your loans.
Depending on your financial assets, your income, your current liabilities and financial history, you may qualify for reduced interests rates that can help you save money while paying back your loan.
Your money checklist – Saving your money
Instead of holding your money under your bed in a shoebox, it’s smarter to put your money into a savings account at a bank that fits your lifestyle. Learning to deposit money into your banking account can be a useful thing to know at an early age. Although you might not have as much spending money on-hand, you will feel much safer and more secure with money saved in the bank. In order to save money, you’ll need to open a bank account.
It’s more beneficial to take advantage of bank accounts with high yield-rates so you can earn higher levels of income from your money you have saved. There are many different local banks and online banks that offer high-yield rates for their savings accounts while checking accounts do not offer the same benefits.
Claim money owed to you
Finding unclaimed money is a nice boost to your finances. If a business or government office owe you money that has not been collected, it is considered unclaimed money. Although there is not a standard Federal Government search website, there are resources available that will help you claim your unclaimed money. Depending on the state that your unclaimed money is located, you can find your unclaimed money yourself.
Your money checklist – Investing your money
The benefits of investing your money are plentiful and there is no excuse not to get started. Traditionally, many financial institutions charged up to $35+ per trade and had minimum account balance requirements in order to open an account.
Merrill Lynch, Fidelity, TD Ameritrade and E-Trade all offered online platforms to invest in the stock market, but they all charged commission fees to invest. With the introduction of Robinhood, the trading application has shaken up the stock market industry, offering zero-fee trades for their users.
With the low barrier of entry, Robinhood has taken over a large market share and changed the industry forever. The app now has more than 6 million users and has raised over $860 million in funding. Its most recent round was a $323 million Series E that valued the company at $7.6 billion.
Your future-self will thank you for investing early. Over the course of 10, 20, 30 years and beyond, your money will continue to collect compounding interest. People often underestimate the power of compounding interest. People tend to jump in and out of the market, removing their money to buy items and ruin the beauty of compounding interest. Investing is a longterm game that requires patience, commitment and the ability to withstand dips in the economy.
Planning for retirement
If you do not have a retirement account yet, it is important to open one sooner rather than later. Your money checklist should always incorporate a retirement plan. Whether you enroll in a company sponsored 401K plan or an individual IRA, it is important to take advantage of these tax-friendly plans.