Strike 1: No Game Plan
- If you want financial freedom, you need to plan ahead. Budgeting for monthly expenses, as well as emergencies, is key to staying on track.
- Your emergency fund is your pinch hitter. You need to have a plan for dealing with those critical moments in life– like a car accident, unemployment or a health emergency.
- That emergency fund should have 3-6 months’ worth of expenses in cash.
Set Your Lineup
- Budgeting may seem daunting, but it’s easy if you start with the basics.
- Ask yourself, how much do I spend on bills every month? How much would I like to invest? How much would I like to save? Once you’ve divided up your funds into these basic categories, budgeting becomes a lot easier.
- After taking care of your “needs,” a portion of your income can be used for “wants.” That includes dining out, traveling or even tickets to your favorite team. It’s important to stay in tune with your lifestyle while learning how to cut back on expenses.
Strike 2: Not Saving for Retirement
- One of the biggest things we forget when working is that the money isn’t going to be coming in forever.
- The problem is, a lot of people aren’t saving for retirement. Two-thirds of Americans don’t put any money into a 401(k) or other employer-sponsored retirement account. (Source: Bloomberg)
- To plan for retirement, part of every dollar we earn should go towards funding our non-working years.
Plan for Post Game
- If your company offers a 401(k), take full advantage of it. Whether you’re 22 or 52, saving as much as you can for as long as you can will benefit you in the long-run.
- If your company doesn’t offer a retirement savings program, start your own.
- A Roth IRA is a key player in any retirement plan thanks to built-in tax benefits. It essentially turbocharges your retirement by allowing the money you invest to grow tax-free. (Source: Fidelity)
Strike 3: Ignoring Your Score
- Just like we check the score during a game, you should be checking your credit score as well! You can get a free report from each of the three major bureaus annually.
- A credit score can determine whether or not you’ll be eligible for thousands of dollars in loans when you go to make your biggest purchases, such as a car or a house. Your credit score will also play a factor in how much interest you pay on those loans.
Check the Scoreboard
- Pay your credit card and other bills on time every month. You don’t want to get bogged down with extra fees and interest. Being proactive with your payments helps keep a healthy credit score. (Source: CreditRepair.com)
- Only use 10-20% of the credit available to you. According to FICO surveys, those that scored as “high achievers,” which is a score of 750 or above, were using an average of 7% of their available credit. For a lot of people, 20% is more realistic, but the lower the better. (Source: CreditCards.com)
- You want to make sure the information is up-to-date and accurate, and that there aren’t any mistakes. I have links on my website that will walk you through how to dispute mistakes with the credit bureau.