Geber86
503589356
Identify your long-term goals.
Think about what’s most important to your family. Is it annual vacations? Getting out of debt? Paying for college? Are these goals for the next five years? The next 10 years? Thames recommends writing down your future finance aspirations to help curb any temptations to splurge on unnecessary items and to keep a steady reminder of your goals.
Track your spending.
“Use an app, a software program, a spreadsheet, or a piece of paper to keep precise track of every dollar you spend every month,” says Thames. “Knowing where your money goes is the first step to creating a long-term financial plan and is a prerequisite to just about every other financial exercise.”
Know your debts and interest rates.
You already know that accumulating debt isn’t doing you any favors, but Thames says to make sure you’re tackling it in a proactive, mathematically sound way. “Interest is what makes debt so terrible,” says Thames. “By identifying which of your debts have the highest interest rates, you can create a plan for paying down each debt.”
Save for a rainy day.
It’s imperative that you have an emergency fund to create a buffer between your family and potential financial catastrophe. Your emergency fund should be three to six months of living expenses (calculated from Step No. 2) in an easily accessible checking or savings account. However, Thames warns, “none of these things are an emergency fund: a paid-off house, a paid-off car, your grandmother’s china, your 401(k). If you were to lose your job, have your car die, become ill, or experience any other unforeseen challenge in life, your emergency fund is what would allow you to still pay your rent/mortgage, feed your family, and pay your bills while getting yourself back on track.”
It’s never too early to save for retirement.
Start contributing today! Thames recommends finding out if your employer offers a matching 401(k) or 403(b) program; an employer match is free money and one of the best ways to build your nest egg.
