As the holiday season draws near, most people find themselves thinking about their finances as they plan to celebrate the most wonderful time of the year. October is National Financial Planning Month, which is a great time before the holidays to bring awareness to your plan and learn some tips and tricks on how to get (and keep) your financial planning in order. As a Financial Advisor in Murfreesboro, TN, we've found from working with clients that getting started is often the most challenging step. Therefore, make the month of October your goal to get started!
Create a Budget
The first step in understanding and taking control of your finances is creating a budget. The next, and most important step, is sticking to it! Everyone’s budget will look a little bit different, but the 50/30/20 rule is a good place to start.1
The 50/30/20 rule states that 50% of your budget should go to essentials, such as rent, food, and utilities; 30% should go to wants, such as entertainment or travel; and 20% should go to savings and paying off debt.
There are also a lot of helpful apps to help you stick to your budget, such as Mint, You Need a Budget (YNAB), and Every Dollar.
Be Smart With Your Debt
Not all debt is created equal, meaning debt isn’t always a “bad” thing if you are smart with it. For example, taking on a car loan and making all the payments on time can help you afford a car if you don’t have enough money to pay cash and can help you build up your credit score. However, be wary of high-interest debt such as credit cards, because that can get you into problems quickly.
Understand Interest Rates
Speaking of interest rates, it’s important to understand how they impact your finances and debt. Mortgage rates vary depending on the current market and your credit score, but are generally reasonable in comparison to other debts. Credit cards rates often exceed 20%. With that high of a rate, you can see how getting into credit card debt can quickly pile up and make it hard to take control of your finances.2,3
In addition, understanding interest rates can help you make strategic financial planning decisions. Rather than paying all cash for an asset (e.g., a car or a house), if you can get a low-interest loan, you can consider investing the cash you would have spent on an investment vehicle that could generate a higher return than you are paying in interest.
Save for Your Future
Whether it be through an employer sponsored plan or exploring individual retirement plans, such as Traditional IRAs or Roth IRAs, consider beginning to save for your future. Even if you begin with a minimal amount, creating a savings habit is valuable. With time being the most significant variable in successfully investing, the sooner you begin the greater likelihood of success.
Review Your Insurance
Lastly, ensure that you are properly covered with the right insurance. If you have dependents or people relying on your income, life insurance is necessary. Life insurance can ensure that the people you love will be taken care of if something were to happen to you. In addition, it's a good time to review renters or homeowners insurance, car insurance, disability insurance, and health insurance.
There are lots of things you can do to take control of your finances for National Financial Planning Month, and these are just a few. If you're in search of a professional to be your guide, contact us. As a Financial Advisor, we enjoy coming alongside others to create a bright future!
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.