 Regardless of where you stand financially right now, it's so important (if you're not already doing so!) to get on the path to improving your money situation -- ASAP! In times of economic stress and uncertainty such as now, there's nothing more important than solidifying your financial foundation. Especially when "fixed" savings vehicles such as CDs, Money Market accounts, Treasury bills, etc are paying near all time lows, eliminating debt and the "guaranteed" interest associated with it are no-brainers.
Here are my top 8 Ways to Dramatically Improve Your Finances ... Beginning Now!:
1. See where you’re spending. Start your plan by writing down where you spend every dollar over the next month. You may be surprised at what you’re spending money on – and how much you’re spending on certain things.
2. Make a budget. If you're married, you both MUST agree to it. Once you know what you’re spending and where, create a written budget and stick to it. It’s the most effective way to stay within your means and curb bad spending habits. Be sure to review your expenses against your budget monthly.
3. Eliminate your debt – ALL of it. The more debt you can pay off, the less interest you will have to pay, and the more you can funnel into savings and investments for the future. Start first with getting rid of all your debt except your home mortgage. You can begin attacking it after you're saving at 12-15% of your gross income, and adequately putting away money for your kid(s)'s college.
4. Start saving. A savings plan helps meet financial goals and provides security. Set aside a percentage of your monthly income as savings. Twleve to fifteen percent is a good target if you’re in your 20s or 30s, increasing it if you’re older and behind in your retirement planning. Make it the first “bill” you pay by setting up an automatic investment. Get out of debt first (except your home), though.
5. Plan for your retirement needs. Contribute to an IRA or participate in your company’s 401k plan. The yearly maximum you can contribute to these tax-advantaged plans changes: this year it’s $5000 in your IRAs and $15,500 in your 401(k), with additional “catch-up” (not to be confused with ketchup) contributions if you’re at least 50 during the ’07 calendar year. The catch-up is $1000 for IRAs and $5000 for 401(k)s. If you have difficulty determining your retirement savings requirements, work with a good (one with the heart of a teacher and coach) investment advisor or financial coach to work out your plan.
6. Pay with cash. It’s one of the surest ways to stay out of debt and easily control your discretionary spending. Cash categories should include: Groceries, eating out, clothing, entertainment, misc (such as dry cleaning & postage), personal care, and “mad money” (personal spending). You'll will save more money and get out of debt quicker using the cash system than pratically any other method except selling stuff.
7. Protect yourself from identify theft. Receive an early warning of potentially fraudulent activities. www.AnnualCreditReport.com is good for one free credit report each year from each credit bureau. If you find errors or activity you don't recognize, dispute them with the bureau reporting it and with the creditor involved.
8. Keep good records. Save yourself from scrambling at tax time – and don’t miss any deductions – by organizing your financial records early in the new year. Be sure to save receipts, cancelled checks, pay stubs, bank and investment statements, and any other proof of deductible expenses paid, including your small business (if you have one). Sure enough, the IRS is changing some of the allowable deductions again in 2008 (currently we have over 67,000 pages in our tax code), so you may do well seeking the advice of a qualified CPA or tax preparer.
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