Financial planning strategies in tough times
IndianMoney.com Research Team | Posted On Tuesday, March 24,2009, 07:31 PM
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Even with hints of recovery, it is not easy to scope out the economy's direction and even difficult to make financial decisions for your family in such rough and tumble times. The following strategies can help to strengthen your money management skills. All are designed to give you an edge during the tough times.
1. Evaluate your spending habits
Start first by analyzing your spending and savings habits. Here are questions that you may need to ask yourself :
- Do your debt payments, including your mortgage, exceed 35% of your gross monthly pay? If so, you have too much debt. Your mortgage must not exceed 35% of your gross income (Including property taxes and insurance).
- Do you justify impulse purchases? You have had a tough week, so you buy things to feel better. Or you tell yourself; “I don’t go on vacation much, so I will just buy these Italian shoes!” If this sounds familiar, try a “Stop Spending Week.” Eliminate restaurant meals and unplanned purchases. You will be surprised at the results.
- Do you shop around for the best deal? You can lower your expenses by shopping around for discount. Shopping around could save on a lot of expenses.
2. Organize your financial life
You must keep everything at your fingertips your budget, investments and bills in one place. Staying on top of your finances can be empowering because you know exactly where you stand. You should Review and assess your savings goals monthly. The foundation for living within your means is to get your finances in order. That is necessary because you will need to calculate what it is going to take to meet your long-term goals, for example, retirement plan.
3. Get serious and take these steps
Consolidate credit cards
If you have got three credit cards with different teaser rates or annual percentage rates, you may not have a control on how much debt you are actually carrying. Transfer the balances to one card (make sure you know what the transfer fees are before you do) and pay off the card with the highest interest rate first.
Review investments periodically
Keep on top of how well diversified you are in and make periodic review of your portfolio.
Prepare for the worst
No one ever expects to get out of work. Built an emergency cushion. Six months is ideal. But if you are carrying too much debt, pay that down first.
Get life and disability insurance
All of us need life insurance enough for a surviving spouse to pay off debts and to live comfortably for the remaining time.
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