How to Avoid Financial Ruin
As we move into the New Year, our national economy is in shambles. It is more important now than ever before to protect your finances as well as your identity. So to get you started off right, here are some tips and ideas to get your financial stuff in order.
1. Understand the difference between wants and needs. Being financially stable depends on you being a responsible spender. For example, paying your mortgage is a need, buy new clothes is a want. Being frugal is pertinent. Cut out coupons from the newspaper and pay attention to sales on things that you frequently need.
2. Have 6 months of living expenses in Savings. Take account of your monthly bills, including groceries and gas, and save 6 months of these in a savings account for a rainy day. It’s very easy to save a little every month from your paycheck and put it into an account that may be difficult to get into. This will become your emergency fund and should only be touched in emergencies ( i.e. someone looses their job). If you must dig in, be sure to replace it immediately.
3. Pay off all of your DEBT. Begin paying off your debt by starting with the highest interest bearing debt like credit cards and personal loans. Sometime the interest rates on these can be as high as 39%. Do this before you begin saving. It will help to save you money in the long run and is one of the most important steps to gaining financial independence.
4. Now, more than ever, it is vital that you protect your identity. Identity theft has become a huge problem in recent years. The cost to victims each year is approximately 5 to 7.5 billion dollars with over 500,000 reports coming in every year. You can protect your identity with a service like LifeLock. LifeLock offers a guarantee up to $1,000,000 on their service, reduces the amount of credit card offers and pro-actively guards your good name.
5. To discourage dipping into your savings needlessly, put your savings into CDs, money markets or other tax deferred accounts. If you dont have access to the money, you wont deplete it needlessly.
6. Put yourself on a budget and KEEP that budget no matter what. This is easy to do, folks. Make up jars or boxes with labels like entertainment, pizza, or eating out. Each payday, put $20 in each jar. That is your allowance for that extravagance until next payday. When the money in the pizza jar is used, you simply dont eat pizza again until next payday rolls around. Sounds a little harsh, but it works and you HAVE to limit yourself or you will have no idea where the money went to.
The status of the current economy is awful, but that isn’t a secret. Therefore, we must look for ways to protect ourselves and our financial situation so that we don’t need the kind of financial assistance that some of the big companies have needed. Don’t let any of that nonsense happen to you this year. Keep a budget, look for deals, and spend smart!
If you are careful with your money, you won’t need a bailout. Maybe, you will one day be teaching CEOs how to run the finances of a company!
Linda Seamore is an expert on the subject of personal finance and has written many articles on it and on credit protection services like LifeLock. She suggests researching all credit protection services like www.lifelock.com before signing up.
