Financial Rules To Live Your Best Life

12/17/2019

Have you heard the adage “It's not the amount of money you have, but how you handle it that will determine your financial future”?  If you're struggling to get your financial life under control, maybe it's time to go back to basics with these financial rules.

Know where you stand

1. Check your credit score

Keep an eye on your credit score by checking it at least once a year. You can get a copy of your credit report once a year for free at annualcreditreport.com or by checking in with one of the three credit bureaus: Experian, Transunion and Equifax.

Other credit score monitoring sites like Credit Karma are a good resource for understanding how your credit score can change over time.

You can learn more about the different components that make up your credit score here.

2. Start a budget

A budget shouldn't be something that's restrictive; rather it allows you to understand where your money is being spent and lets you spend without guilt within the bounds of your budget.  If you're not sure where to start in creating a budget that works for you, you can learn more about it here.  Monitor your budget over the course of a few months to get a real understanding of where your money is going. Periodically check in with your budget to make sure you're staying on track as your life changes from time to time.

3. Understand your debt

Whether you have credit card debt, student loans, car loans or a mortgage, you need to have a firm understanding of what you owe and what the interest rates are.  If you're struggling to pay your debts on time or are feeling overwhelmed, contact a certified credit counselor who can help you get your finances back under control.

Once you understand credit, the importance of a budget and your debt situation, you are in a position to take your financial life to the next step.

Get your money organized

4. Set up an Emergency Fund

Many Americans cannot deal with a $400 financial emergency without going into debt. This kind of financial instability creates unnecessary stress. The way to avoid this is to establish an emergency fund.  Set up a separate bank account, so you're not tempted to dip into these funds for a non-emergency. Gradually begin shifting money into your account to build up a nest egg. Aim for a full month's worth of expenses in your emergency fund and then build up to 3 months' expenses.

5. Pay Yourself First

Find the ‘fat' in your budget.  You may need to look for items you can cut from you budget to create a little extra cash, then pay yourself first by automatically transferring a portion of your earnings directly into a savings or retirement account. Treat this money like ‘just another bill' that you need to pay and watch your savings begin to accumulate over the long term.

6. Set financial goals

Set yourself a SMART financial goal. A SMART goal is Specific, Measurable, Attainable, Realistic and Timely.  You can learn more about setting a SMART goal here. Maybe your goal is to save for your retirement or take a vacation. Whatever your financial goal, it won't come to fruition without planning and actively working towards the goal.

Look ahead to a brighter future

7. Embrace the power of delayed gratification.

Try to be aware of your spending habits and think hard about what motivates you to spend on nonessential items.  By keeping a clear picture of the financial future you would like to develop and embracing a mindset of delayed gratification, your goals will be attained more quickly.

8. Avoid lifestyle inflation

It feels wonderful to get a raise or increase in your income.  The trick to a solid financial future is to not allow your lifestyle to increase and absorb the extra money on a more lavish lifestyle.  Put your extra cash to good use by increasing the rate of savings in your retirement or emergency fund, or use it to destroy your debt.  It's ok to enjoy a portion of your increased income, but don't allow all of it to be frittered away. Make it count, your future self with thank you!

9. Check in on your finances regularly

Being in control of your finances is not a ‘set and forget' situation.  By checking in with your financial situation every month or two, you can adjust your budget and make sure you don't begin overspending.  If you use all or part of your emergency fund, make sure you work to replace it. Sticking with these basic financial rules over time will make your financial life far less stressful.

Remember, if you need help with your finances or your debt seems overwhelming, Navicore Solutions' certified credit counselors are here to help.

 

 

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