In order to gain control of your finances and achieve financial freedom there are some “Do’s” and “Don’ts” that you want to keep in mind:
Do
- Make a spending plan.
- Use cash.
- Cut-up your credit cards.
- Figure out how much you owe, the interest rate you owe, and your minimum payments.
- Organize your debt by highest interest rate to lowest interest rate.
- Use the snowball method to attack your debt. (Pay the most that you can on the debt with the highest interest rate and make the minimum payments on the other debt.
- For 30 to 60 days, keep track of all the money you spend by writing it down as you spend it. Use these figures when you make your spending plan.
- Create an emergency fund that has eight to twelve months of living expenses in it.
- Pack your lunch for work and for the kids.
- Contribute to your 401(K) up to your employer’s match.
- Fully fund your retirement account.
- Start paying extra on the principal amount of your home loan or if you’re renting make sure you start saving for your home. You want to have saved 20% of the purchase price of the home as a down payment plus closing costs.
- Make sure you have the necessary documents in place, such as a will, a living revocable trust, a durable power of attorney, etc.
- Obtain term life insurance only for both spouses. This should be in the amount of ten times their annual income. If one spouse does not work, figure out how much it would cost you pay for all that spouse does, such childcare, cooking, cleaning, etc. Then get a term life insurance in the amount of ten times that annual cost.
- Save money for gifts, such birthdays, anniversary, Christmas, baby showers, bridal showers, etc. on a monthly basis.
- Save monthly for known annual expenses, such as car or home insurance, car registration, etc.
Don’t
- >Waste money on impulse buys.
- Get new credit cards.
- Consolidate your debt or get a home equity loan to pay off your debt until you solve the problem you have with spending.
- Ignore your creditors.
- Forget about your spouse when you make your spending plan.
- Start saving for your children’s college until you have your consumer debt paid off, you have eight to twelve months expenses in an emergency fund, and you have fully funded your retirement account.
- Ever think it’s too late to start saving.
- Give in to friends who invite you out to eat or party and end up spending money you don’t have to spend.
- Buy coffee, sodas, bottled work when you stop and gas up. These items add up and wreck havoc on your budget.
- Shop without a grocery list or coupons.
- Wait until December to buy Christmas gifts.
- Let known annual expenses catch you by surprise, such as car or home insurance, car registrations, etc.
