5 steps to get your financial priorities in order
How do you keep everything on track when you’re juggling lots of financial demands? It takes planning and prioritising. These 5 steps can help.
1. Focus on your financial plan.
Competing (and sometimes unexpected) financial demands are a fact of life—the air conditioning breaks, the car needs new tires, taxes are due, you know how it goes. The trick is not letting these inevitable expenses derail saving for retirement.
2. Build an emergency fund.
Start by saving at least one month of income in your account. Then work up to at least 6 months' worth of living expenses in a high-interest rate account. And whenever you tap into your emergency the fund, make rebuilding it a priority.
3. Keep saving for retirement.
Funding retirement is every bit as critical as building an emergency fund. The most common mistake people make is waiting to save. Stop delaying and start today – compound earnings can help your retirement dreams become a reality. The longer your funds grow, the more you may have available to you in retirement. And, keep increasing your contribution over time. Tip: Every time you get a raise, put 1 to 2% of your raise towards retirement savings.
4. Pay down high-cost debt.
Most of us have car and home payments for a big chunk of our lives. Tackle the highest interest rate deb first and strive to eliminate these expenses. Do what you can to pay more than the minimum due to wipe out this debt more quickly. Once you pay off your debt – you’ll have a better financial cushion and can make different decisions towards planning for retirement.
5. Budget for future expenses.
Once your emergency fund and plan for retirement are on track, start saving for foreseeable expenses, such as a new roof or a special vacation.
One way to “find" that extra money: Whenever you pay off a car or other instalment loan, continue putting the same monthly amount into a savings account, so you'll be ready for the next big expense.