The U.S economy has not recovered from the devastating effect of the recent financial crisis. Unemployment rate is still quite high (9%, says the labor department) and consumer debt is soaring. Therefore, it is no wonder that monetary crisis is the foremost problem in most American families these days. Under the circumstance, you need to be smart in money matters. You should follow some simple yet effective rules to say goodbye to fiscal problems. Here are some great money tips for you:
- Maintain a rainy day fund: Do you think you don’t need an emergency fund? You are wrong. An unexpected financial crisis can push even a well-off person into debt. It would be great if you can use a high yield savings account for this purpose. Contribute at least twice a month towards your rainy day fund. Make sure that you do not touch this money for trivial reasons.
- Get organized: Difficult economic climate demands prudent money management. Therefore, consider keeping your entire financial information in one place. You might take advantage of free services of websites like mint.com. Also, there are several other free personal finance softwares that would allow you to get an idea about your financial health, analyze your finances, and start a budget.
- Get rid of your debt: Consumer debt has become a major issue in America. But you can easily come out of it if you follow an effective strategy. For instance, you might want to check out the debt avalanche method, which is advocated by Robert Kiyosaki. According to Mr. Kiyosaki, it is always a wise decision to eliminate the debts with higher rate of interest first. If you stick to this strategy, you are bound to get out of debt within a reasonable period of time, and you would also be able to save money.
- Debt consolidation: Depending on your situation this can be a good move. Debt consolidation refers to merging all your debts and paying them off by taking a single loan. This debt relief process works best for people with several credit card debts. The best thing about debt consolidation is that it does not hurt your credit rating.
- Do not mess with retirement accounts: Your debt payments are important. So are your everyday expenses. But that does not mean you will borrow from your retirement account. Retirement accounts like 401(k) guarantee you a secure future. They would help you to support yourself and your family when your income drastically drops after retirement. Consider liquating 401(k) and other similar accounts only to avoid serious situations like bankruptcy.
- Hire a financial advisor if you can: A lot of people believe that financial advisors are exclusively for extremely rich people. This is a rather misleading theory. You certainly do not need to hire a FA with extremely high fees. But hiring someone with reasonable fees might pay off. A FA can spice up your investment strategies and help you to reap huge profits.
- Be careful with stocks: Stocks can make you a millionaire, but they can ruin you too. Remember that investment in stocks demand a certain level of expertise and a thorough knowledge of the market. If you are a newbie, but you want to put your money in stocks then better invest a small amount to play safe.
- Set short term and long term goals: It is very important to have a clear idea about what you want from life. So make a list of your goals and make plans accordingly. Are you planning to buy a house? Do you want to retire early? Are you determined to save for your child’s higher education? These are goals which require planning. So make your moves carefully.
Money management is a very tricky business. So you should always remember the above tips and maintain fiscal discipline while managing your finances.