Talk to a debt counselor toll free:800-300-9550
Our Clients Rate Us Excellent
Based on 3234 reviewsTrustPilot Reviews
No debts ever went away because they were ignored. One of the key parts of good money management is to pay off your debts as quickly as possible. This means you'll need to make a plan. There are two popular plans for paying off debt. One is called the Avalanche method and the other is called the Snowball method. Both have their pros and cons so you'll need to research both and then choose the one you think would be best for you – then take responsibility for sticking to it.
Take responsibility for building an emergency fund
If you answered that question about a $400 emergency by saying you would have to borrow the money or sell something, it's because you don't have an emergency fund. To be good at money management means having an emergency fund of at least three months' of your living expenses or, better yet, six months' worth. You will have a financial emergency. It's not a question of if. It's only a question of when. You'll be hit with an unexpected medical bill or your automobile will suddenly need a costly repair. Whatever the emergency you’ll need to have money available to cover it or you'll need to borrow it, which means piling on new debt.
Take responsibility for your future
You probably haven't thought much about retirement. Well, now you need to. If you want to retire at a reasonable age – or even retire at all – you need to take responsibility for your future by saving and investing on a regular basis. If your finances are such that you can only afford to put away $20 a paycheck, that's okay. The important thing is to be saving something. You can always increase that $20 as you earn more and become good at money management. If your employer offers a 401(k) plan and you haven't already signed up for it, you need to do so. This is especially true if your employer provides matching funds. But if there’s no 401(k) where you work that's no excuse for not saving money. You could open up a traditional IRA or a Roth IRA and start sticking money into it. You’ll also need to decide how to invest the money in your 401(k) or IRA.
One thing you won't want to do for sure is to try to pick individual stocks. That's where even professional stock pickers often fail. Good money management means investing in something safe like index funds so that you’re spreading your risk over literally hundreds of different companies. Index funds such as the Vanguard S&P 500 ETF, the iShares Core S&P Small-Cap ETF and the iShares U.S. Preferred Stock ETF have low costs and while none will shoot up dramatically overnight they are all guaranteed to increase in value over the years. In fact, you could call these index funds "set it and forget it" because all you'll need to do is keep investing in them and leave them alone until you're ready to retire and begin cashing out.
Good money management is tough
We understand that change is difficult. It's hard to stop buying stuff or doing some of those things that make your life fun and enjoyable. But good money management means you ‘ll need to make changes in your life and take responsibility for some of those things that you've been ignoring like building an emergency fund. But when you tackle these challenges and succeed, you'll not enjoy good money management, you’ll have a better and less stressful life.