No Brainer Finances
Hello All,
We dinks tend to get a fair amount of email. Some messages are from Nigerian spammers, some are from the various blog services we subscribe to, sometimes its weirdos asking for a loan. The best kinds of emails we get are from people who want to talk about personal finance!
Most of these kinds of questions are, so "What do I do now", or "How do I get started" sorts of questions. Well, if you want to more control over your personal finances, there are several thing you can do. These are what the kids call "no brainers", because they are sure fire ways to improve your bottom line.
1) Pay off your credit cards: There are several reasons to pay off your credit card debt. First, its expensive. Most credit card rates are around 13%, but some of them can charge a LOT more. Second, the interest on credit cards isn't tax deductible, so there isn't any tax advantage in carrying it.
2) Max your your 401k: Right, if you have a tax advantaged pension plan like a 401k or 403b plan you should definitely max it out. There are several reasons for this. First, the plans are tax advantaged, which means that every dollar you contribute to your 401k is a dollar off your taxable income. Second, lots of companies will match a given percentage of your contributions. This is typically 3 to 5% or something like that. Third, this also puts your money to work on the market, which will probably give you a better long run return than stashing it in a savings account.
3) Read Up On Personal Finance: If you don't know whats going on, its hard to know how to get ahead. Try investing some time in a good personal finance book. I recommend Personal Finance for Dummies, by Eric Tyson and Making the Most of Your Money by Jane Quinn. Its important to understand the basics, that way you can better make decisions and recognize good deals on financial products.
Good luck!
-James
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3 comments:
Well done, again!
All three points are dead on.
May the Swiss_Mouse add #4?
Re-evaluate your car and car payments. HUGE savings are to be had by those who are not "f-lease-d" and who do not care about driver an older car.
Good advice. I haven't read books on personal finance, though. Maybe if I had, I'd known to sell some of my technology stock before internet bubble burst or invest higher percentage of my savings/401K into stock market when I was younger.
I'd also say buy a home that is below what you can afford, preferably with 20% down. Might be difficult nowadays, but waiting is a valid option. Also, is a house for a family really a necessity? For someone who can afford it - sure, but is it really worth getting mortgage one can barely afford? Around here I see many families living in condos or co-ops. Once you own "something" it may be easier to upgrade later on. Savings on mortgage frees up a nice chunk of money for other things.
As to cars - depends on one's means. I personally like to buy them new then drive for 100K or more - until it starts having problems. Buy one for cash if possible unless the interest is less than what you can earn on risk-free investments after taxes.
Great points. I'd like to add a 4th...Save, automatically. What keeps people in the cycle of debt is that they have no cash reserves to cover emergencies.
Every month, have as little as $5 transferred from your checking account or payroll check to your savings account. You'll be amazed how quickly those small amounts add up.
Barbara Stanny, author, "Overcoming Underearning"
web: http://www.barbarastanny.com
blog:http://barbarastanny.wordpress.com
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