Back to the Basics of Saving for the Future

It’s time to get back to sound financial basics!

Even though the economy seems to be improving, it is important to make sure you’re being proactive to keep yourself in the best financial shape possible. Here are 5 tips to do just that.

#1 Learn from our country’s debt crisis. Don’t spend what you don’t have. Borrow sparingly, and only for those things that have lasting value, such as a home or an education. And use your credit cards only for expenses that you can pay off every month. Here’s why: A $2,000 balance at 18% interest would take nearly 10 years to pay off if you made the minimum 4% payment each month, and would cost you an extra $1,116 in interest.

#2 Take a portion of every paycheck and put it into savings. You’ll learn to live without that $25 or $100, and the power of time will help you build an emergency or vacation fund or a down payment for your new home.

#3 Use your online bill pay options to manage and expedite your bill paying. By setting up automatic payment dates, you can stay on top of your bills even when you’re busy with other things and avoid slip-ups that result in late fees, greater interest payments, and credit score dings.

#4 Make a plan to pay off your debt. We all have debt. But many of us don’t manage it well. As soon as you borrow funds, sit down and pencil out how – and when – you’ll have it repaid. It turns a negative, worry-based mentality into a goal-focused, I’m-in-control mentality that’s more positive, and more productive.

#5 Find a retirement account. Who knows what the future will bring. Take the initiative to build a nest egg – and some peace of mind – now. Most people don’t start planning for long-term goals until they’ve reached their forties, and then they panic-save later on. Take advantage of time. Even if you can afford to put away only a small amount each month, slow and steady can win big.

Ideally, you’ll want to save about 10% of your income for retirement each year, but you don’t need to start that high. Work up to it over time. The best place to build your retirement account would be in a 401(k) or an IRA. Both vehicles offer appealing tax advantages, but the employer-sponsored 401(k) may also score you free money if your boss makes a contribution too.

Lastly, remember to seek professional advice if you need it to help keep up to date on new financial products and new and changing tax laws.