Let’s be honest. Personal finance is a deep subject. It’s fair to say there’s more to know than the average credit-card-swiping, online-bank-account-monitoring, stock-market-checking individual can keep track of. That’s why we’ve assembled some of the tip top tips for personal finance in one place.
Know your net worth
The difference between your assets and debts equates to your net worth. Yeah, it’s a big-picture number. But when tracked regularly, it can give you a good sense of whether you’re moving forward in your financial situation or if you need to make some budgeting adjustments. Our calculator can help.
Understand the power of interest rates
Suffice it to say that interest rates drive a lot of decisions about debt and savings. Which loans to pay off first, what savings account to open, where and when to refinance a home – the answer to all of these comes down to interest rates. Pay heed and gain command of the interest rates in your life.
Set a budget
Not just a financial buzz word, a budget helps you know how much you’re spending and where you need to cut back or reallocate. Get started with a cash flow analysis.
Start an emergency fund
An emergency fund houses cash you can access immediately in times of trouble. What’s trouble? Job loss, medical emergency, broken down car, major house expense (broken air conditioner, leaky roof). Take the extra step and set up a separate account for emergencies, don’t combine it with an existing checking account. Doing so will keep you honest and your emergency fund a reliable resource.
Budget for fun
No one’s a happy saver if there’s no room for fun. So include in your budget some resources for entertainment such as restaurants, movies, happy hours and sporting events.
Pay yourself first
Like it or not, you have financial priorities – building an emergency fund, paying down debt, saving for retirement. Make it easier to stay true to your financial priorities by allocating a portion of your income each month to funding them…before you pay bills, buy groceries or spend on entertainment. Your financial advisor can help by setting up a plan that automatically routes money from your paycheck to your investment accounts.
Set financial goals
Financial goals are something you’ve probably heard about, but what are they? A goal may be anything significant you want to do with your money, like buy a house, send a child to college, pay off debt, take a European trip, get replacement windows. You should never be without goals. Even if you think you don’t have anything big to save for, think again. There’s one goal that applies to almost everyone…retirement. Once identified, determine how much you need to save for each goal, apply a target date, and set up regular investments toward your goals. Our savings goals calculator can help.
There’s a lot to know about personal finance. But you’re not in this alone. A financial advisor at Waddell & Reed can help you create a financial plan designed to address each of these tips and more.
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