People tend to think that different financial rules apply to people with different levels of income. While there may be a small amount of truth to that statement, there are some basic financial rules that apply to everyone, regardless of income level. No matter where you stand, you can benefit from these tips from Freedom Debt Relief.
Build an emergency fund.
Unexpected expenses can happen to anyone. So everyone needs an emergency fund. An emergency fund is simply a cash reserve or savings that you can access to cover unexpected expenses. You build a healthy emergency fund by making contributions to it each month until you’ve reached the ideal amount of three to six months of your living expenses.
Save 15% of your income for retirement.
The later you start saving for retirement, the more you have to put away each month to guarantee you’ll have enough money when you retire. A good rule of thumb is to set aside 15% of your monthly income towards your retirement fund. It’s a plus if your employer matches your contributions.
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Stay on top of your student loan payments.
Student loan payments are a pain to deal with, but they’re not going away until you completely pay off the debt. Don’t let your student loan payments get behind, warns Freedom Debt Relief, it can be difficult to get caught up again. If you’re having trouble making payments, contact your loan servicer to learn what options are available to you.
Save for your child’s college education.
Now that you’ve experienced the struggle of student loan payments, you can prevent your children from needing student loans by saving for their college education. Start small if you have to, but make sure you’re putting something into a 529 college savings plan each month.
Don’t borrow too much for a car.
You’ve probably heard that a car’s value depreciates the moment you drive it off the lot. For that reason, you should finance as little as possible a car. Aim to pay at least 20% down so that you’re not upside down in your loan the instant you sign the paperwork. You might also consider buying a used vehicle since they’ve already experienced the initial depreciation, recommends Freedom Debt Relief.
Work the credit card system.
If you use credit cards the wrong way, you end up paying hundreds of dollars in interest to your credit card issuers. On the flip side, your credit card issuer can owe you money if you use your credit card in a way that benefits you. Pick a rewards credit card that pays rewards in categories that you actually spend in, recommends Freedom Debt Relief. Then use that card for the majority of your spending.
Make sure you have the right insurance.
Insurance is one of those things that feels pointless to pay for until you actually need it. Then, you realize just how important it is to have insurance. You don’t want to learn that lesson the hard way. At a minimum, you should have health insurance, homeowners or renters insurance, auto insurance, and life insurance. Consider taking on additional insurance policies depending on your needs.
Buy just enough home – not too much.
When you’re buying a house, resist the temptation to max out your housing budget. Only buy as much as house as you can comfortably afford to pay for each month, even if the bank approves you for more. Then, work to pay off your mortgage quickly to save money on interest and to own your home faster.
You see, these tips span income levels. Regardless of how much money you make, applying these tips will ensure you’re making the most of your finances.