Personal Finance Makeover

One of the main reasons our economy took a dive these past two years is because people took their mind off of the basics. Wealth and financial stability are created not by fancy and complicated investing strategies, not by being overleveraged and hoping for a great return; Wealth and financial stability are created by following a very basic, common sense approach to your finances. I am not a financial advisor, but I do know a thing or two about managing personal finances. Here I will share with you some basic yet proven strategies.

1. Pay Yourself First. The first 10% of your income should go into some type of savings account. If your employer offers a 401 (k), a great way to hit this target is to commit 10% of your income pre-tax. This lowers your tax liability, and creates a nice nest egg. Whatever vehicle you choose for this money, it should be no less than 10%. Trust me, you can live off of the other 90%

2. Do not buy what you can not afford. Sounds simple right? Yet millions of people purchased homes that they could not afford using bizarre adjustable rate mortgages. If you can not afford something, save up until you can. Do not use credit cards if you are going to have to carry the balance forward, that means you can not afford it.

3. You need a rainy day fund. You must put away some money just in case something happens. Most experts recommend 3 months salary. I suggest going past that and shooting for 6 months. Whatever number you choose, put it away in a safe and easy to reach account, and do not touch it unless absolutely necessary.

4. Do not expand your lifestyle. Too many people expand their spending to meet their income when things are going well. If you are in sales, just because you have a few good months, does not mean you should go out and by a new car. When times are good, and you are getting more money than normal, you should be looking to save and invest that money.

4.1. Contract your lifestyle. If we piggyback off of the previous concept, we will be lead to the logical conclusion that we should spend less money. Take your lunch to work as often as possible. Clip coupons (what, you're too good for saving money?), And look for sales. Buy items off season whenever possible. I know this may not sound like the most fun, but no one has ever become rich by writing checks.

5. When in doubt, consult a professional . When investing, seek qualified advice. Would you visit a gas station clerk to ask advice about a heart condition? I know that sounds ridiculous, but people do this all the time when it comes to money. Financial professionals are professionals for a reason.

There it is, five simple ways to get your finances where you want them to be. Nothing fancy, no get rich quick tips, but it works. It has worked for millions of people, it can work for you too. As always, now is the best time to start!

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