4 Things You Can Do to Get Your Finances in Order
(GAL) – Are you familiar with financial phrases like credit score, retirement savings, debt retirement, or account balances? If so, that’s great, you’re well on your way to get your finances in order.
If these phrases tend to cause a bit of anxiety, you’re not alone. About 75 % of the current millennial generation feel as you do, according to the National Endowment for Financial Education. This organization was founded in 1972 and is a non-profit 501 (c) (3) foundation with its primary purpose being to help Americans improve the quality of their lives by educating them with basic programs that teach one to make sound financial decisions.
Many millennials tend to shy away from the idea of getting their financial house in order. They feel that ridding themselves of debt and creating an emergency fund is not a sprint, but a marathon. However, just making some small changes in financial habits now can have a significant impact in your financial picture months and certainly in a few years.
The following four steps can be put in practice today to help clean any bad money habits. They will not only get you on the right path, but if you stick with your plan for just one year, you should be in better financial shape.
- Make a note of your credit score. It’s a good idea to check your credit score before starting to get back on track with good money habits and also review your credit report. This will tell you where you are financially, and should your credit score not be as high as you would like, these steps can help you to improve it.
It’s important that you establish a history of making your payments on time and also maintaining a good credit utilization ratio. These two things alone, can improve your credit score in a short period of time. A good place to look for your credit score is the bank where you have your accounts. You should be able to get this at no charge from them.
- Create a plan to reduce or eliminate your debt. Gather all of your financial accounts, such as checking, savings, credit cards, mortgage, and calculate your net worth at the beginning of these steps. Don’t let a very low net worth discourage you, this is used to track your progress and also shows you where you need to start.
When you have that finished, create a workable budget that includes paying off your debt. At this point, concentrate on paying off credit card and any other unsecured debt. Apply any extra money to one account at a time until its gone, then start on the next one.
- Create an emergency fund. Your budget should include a monthly amount going to this fund and it’s a good idea to have the transfer done automatically when you deposit your pay check. Just depositing $100.00 per month will result in a $1,200.00 emergency fund in a one-year period.
You should try to increase that amount if possible, after debts are paid, so that you can have three to six months cash reserve to cover your expenses in case of a job loss or some other serious issue.
- Start saving for retirement. This is a very important item and you should begin saving as early as you can. If your employer has a retirement plan, start contributing to it, even if it’s only a small amount. Some employers do a matching contribution so it’s to your advantage to put in as much as you can.
We know from experience it’s not easy taking these steps to improve your financial habits, but it will pay off. Take control of your spending and make every dollar work for you, and in a relatively short period of time, you’ll be able to get your finances in order and reach your financial goals.