Since we have now covered most of the major topics in Personal Finance Guide, it’s time to start going over what we feel are the most important points from the first 11 issues. This week, we’ll review the most important points from issues 1-5.
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Knowing where you currently stand financially is the critical first step in mastering your personal finances. Two great ways to do this are:
- Checking your Credit Reports
- Completing the Net Worth Calculator
Most people have only a vague idea of where their money goes, but they generally find that it doesn’t go as far as they think it should. The solution is to create and maintain a budget, which is an itemized description of income and expenses. This will enable you to determine how you spend your money, get more out of the money you have and make it easier to reach any financial goals that you set for yourself.
- Check out the Monthly Budget Calculator
As with most things in life, it is important to set goals for yourself when it comes to personal finances. Everyone’s goals are going to be different and will depend on a variety of factors like current income, lifestyle, children and retirement aspirations.
A good tip for setting goals is to adhere to the “S.M.A.R.T.” method, making sure they are:
- Estimate what you’ll need for retirement by using the Retirement Calculator
Having the right kind of debt and making all of your payments on time can actually be a good thing. Student loans, auto loans, home mortgages, etc. can all help you build a strong credit score over time. These are the types of debt that you shouldn’t shy away from, provided of course that it makes sense to take out these loans and you can meet the monthly payment requirements.
The type of debt that should give you nightmares is revolving credit card debt. If you don’t have any, or pay yours off at the end of each month, then we applaud you. However, if you’re like 81% of Americans, you have at least some revolving debt. This debt has a very high APR (Annual Percentage Rate) and can take years to pay back if just making minimum payments.
- Fill out the Debt Reduction Calculator to see just how long it would take to fully pay off a credit card making minimum payments.
Reducing your spending and expenses will allow you to make the most out of the money that you bring home each month. We don’t advocate that you stop spending all together, but rather recommend that you make small changes that can give you more money to work with each month. With the additional money that you will have, you’ll be able to save, invest and pay off debt better than you ever thought possible!
- Check out these 15 ways to save money each month.
Stay tuned for next week’s issue, which will cover Personal Finance Guide
Review Part II.