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Finance For Dummies

Finance For Dummies offers personal finance information on investing, retirement investing, finance, insurance, credit cards, loans and more. Personal finance education is our goal.

Thursday, July 13, 2006

Financial Goals

Have ever sat down and really examined what your financial goals are? Do you know exactly where your money goes? How are you saving for retirement? College funds? Medical costs?

If this scares you—well it should. Because if you are not planning for the future it will be much more difficult to start being disciplined as you grow older. Don’t count on the government solving Social Security’s future or for them to figure out Medicare. You need a plan to take care of yourself and your family.

You need to ask yourself those tough questions. Are you doing everything you should so you and you family’s future is taken care of? It is never too late, but you really need to start now if you have not already.

Start by doing the following:

  • Budget: know where all you money goes
  • Have smart accounts: this means get the best interest rate on checking and savings accounts (bankrate.com)
  • Pay your bills online-less paper and more organized way of paying
  • Direct Deposit: most do this already with their paycheck—but start if you have not
  • Direct Debit: investment or Roth IRA funds directly debited from your bank account
  • Refinance your mortgage if it can save you money (rates haven risen, but are still very low historically speaking)
  • Ask your credit card to lower your interest rate

Next you need to set some goals.

For example, let’s say you want to buy a home.
  • Do you have any debt (especially credit card)?
  • Do you have a safety net of at least 6 months of funds to get you by in case of a loss of job, accident, etc.?
You really want a house, but you need to take care of these things first. The average American has $8000 just in credit card debt—that does not even count other types of debt. If you are paying 12% on $10,000 credit card debt you should not be thinking about buying a house yet. You can plan, but you need to focus on reducing high APR debt that you have.

Maybe, you are single, have no debt and little to no savings.
  • How do you plan on getting a down payment for a home?
  • If you do get a down payment what happens if you are hurt and cannot work or lose your job?
Yes, this is difficult but these are only the first couple steps. If you have all of that taken care of you need to try seeing if you can save enough money each month that will be consumed by the mortgage, taxes and insurance.
  • Can you really afford that house?
  • Do you have enough money left to pay the rest of the bills? Save money, save for retirement, etc?
It is something to seriously consider.

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