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How to Set Your Financial Priorities in Life - Guide 1

By Edited Nov 13, 2013 0 0
You Can Set Your Financial Priorities in Life

It's so important to set your financial priorities in life because this can help secure your financial future. Too much stress could come from mismanaged funds. Some people may make mistakes in setting their financial priorities such as saving more for their children's college education and a lesser for their own retirement. 

Difficulty:
 
Moderately Challenging

Instructions

things you'll need:

  • Determination
  • Commitment
  • Self-control
  • Aspiration
    • 1

      Set an amount every month for food, water and shelter because these are your basic needs. You need to consider buying various healthy foods and try to avoid unnecessary snacks that are unhealthy. You also need to do your best in your present job because it's your source of income to pay for your utility bills, house mortgage or rent, and groceries. This is where you begin setting your priorities straight.

      Some people are so frugal on their grocery shopping and even ignore their health needs just to buy expensive gadgets or plane tickets for a leisure travel. Take note that taking care of your own daily needs is your responsibility and priority so avoid putting off the rent or house mortgage, utilities and other important things for well-being especially if you have a family.

      Sometimes this could be the cause of disagreement between married couples because they have different views when it comes to money management. The other partner wants to spend most of the money and is not afraid of financial debt while the other one wants to save something for the rainy days or during the times of emergency. Be a good role model to your kids because they think highly of you as a parent.

    • 2

      Pay your credit-card debt if you have any. Paying-off the credit card with the highest interest rate then followed by the ones with lower interest rates is the best thing that you could do in order to eliminate your entire credit card debt. Buy things or goods through cash basis as much as possible and control your spending habits.

      Avoid over using your credit cards so that you'll be able to continue to have access to your accounts if you really need it. Some people who were working and never bothered to save for an eighth month emergency fund and over used their credit end up nothing. You don't want to be in a situation where you have no earnings and can't even access your credit cards because your accounts were already closed.

    • 3

      Concentrate on saving enough cash for your eighth month emergency fund especially when all of your credit card debt is paid-off. This is very important in case of a job loss or other major unexpected things that may happen to you or anyone in your family. Avoid the temptation of buying things that you can just live without and concentrate on building your eighth month emergency savings.

      Setting your financial priorities should be your primary aspiration. Have a clear list of the important things that will cover your monthly expenses and finances and number each item from the highest to the lowest with regards to their importance and need.

    • 4

      Increase your 401(k) or a 403(b) contribution and retirement savings if you already have enough cash savings for your eighth month emergency fund. Try to save 15%-20% of your salary for retirement into a 401(k) plan, if you're in the private sector, or a 403(b) plan, if you're working in a nonprofit organization.

      Invest a certain amount of money that matches to the amount of funds that the company will provide since this is totally free money. There are some employers who don't provide pension to their employees, so if you're currently working with one then you need to contribute to an individual retirement account. You can also automate your retirement contributions so that you no longer need to remember about it every month.

      Try to save for your retirement first before saving for your kids' college education. When your children will grow up, they could avail of student loans, get scholarships or attend a good community college or state university where it is more affordable compared to other expensive private schools. Take note that by the time that they will work, they can also start paying for their college education loans. As they think about their future, you also need to think of your golden years because no one will let you borrow money for your own retirement.

      You may also contribute an extra amount of money each year to your 401(k) or a 403(b) retirement plans especially if you have no children. If you're contributing 15% or more for your retirement plans, you could place some funds for your children's education into a state-sponsored 529 college-savings plan. This is an economical way to save for your children's education because the money in these accounts grows tax-free. The money that you place into these accounts could also be withdrawn free of Federal tax on investment earnings if you'll use it to pay for their higher education.


Tips & Warnings:

  • Always have enough savings as an emergency fund that could cover eight months of living expenses at the minimum. Building your emergency fund can really help ease your financial stress and worries.

  • Place your tax refund checks in savings accounts if you have no credit card debt with high interest rates. You can also invest it if you know some important things about investment.

  • Make an effort to increase your earnings in small ways. If you think that you need more funds for your savings then you can try to work online or work from home to receive additional income.

  • Setting your financial priorities in life will help you stay financially stable because you can easily keep track of your expenses. Take action and focus on paying the debt first while trying to maximize your retirement savings. 

    Save money for regular traveling later on once all your debts will be paid of. You may set up automatic payments from your checking account every month so that you can easily pay off what you owe. You can just open a savings account once you start saving for your travel plans.

  • Check the difference between your monthly revised budget list and your old one so that you could follow what is best based on your financial priorities and goals in life.

  • Avoid renting a big apartment. If you rent, look for a smaller one so that you can save. Always check your daily expenses and weigh what changes you could do to reduce them.


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