Pam Etuglavu's Financial Advice

Be smart with your finances: plan and save!

Being financially savvy means that you will have to learn about a variety of topics such as debt, savings, expenses, budgeting, insurance, and retirement planning. Having an understanding of how all of these aspects work together is vital if you want to lay a solid foundation for your present and future finances.

Budgeting

Budgeting is the basis of personal finance- you make money each week and then you spend it. Even if you don't have it on paper, you budget your money every day. The main problem in lacking a budget is that most of us make so many finance decisions each day, and it can be hard to remember everything. Not understanding your budget can lead to overspending, debt, and a less sound financial future. When creating a budget, you can see a clearer picture of how much you make, how much you spend, and how much you have left over. From there, you can tweak your spending habits and save more.

Trimming Expenses

After you've laid out your budget, you can see where some expenses may need to be reduced. For some, it's as simple as eating at home instead of a restaurant, and for others, it could mean selling an unused family vehicle. No matter the area, everyone can find places to trim their expenses and save a little more.

Reducing Debt

Even after budgeting and trimming expenses, some find themselves still in debt. Using credit and accruing debt isn't always a bad thing; there are both good and bad debts. When you borrow money to finance a home purchase you are taking on a high debt load, but the lower interest rate and the buying of an appreciating asset makes that a "good debt". Going to the mall on a shopping spree with a high-interest credit card and not paying the balance in full is building "bad debt". Getting out of debt isn't hard, but it's necessary in order to have a good financial future. First, you will need to pay more than the minimum, and once you're doing that, you should try to lower your interest rate, either by negotiating with creditors or transferring balances.

Retirement Savings

With fewer employers offering retirement plans and the shaky ground on which Social Security rests, it is more important to plan for your retirement. However, many people feel that they can't save enough each month. Saving needs to be a priority for all of us. The IRS has made it easier with things like 401k accounts, IRAs, and accounts just for self-employed people. These accounts all allow for credits, deductions, and tax-free status on retirement savings.

Insurance is Important

You've laid out a budget, trimmed unnecessary expenses, gotten rid of credit card debt, and begun saving for retirement. But you're not done- there's still insurance to think about. Insurance is vital because it protects your family's finances from disaster and accidents. Some policies are required, but some could be done without.

Financial planning isn't just for accountants and other experts. Anyone with a basic understanding of budgeting, saving and spending can start to lay the foundation for a more stable financial future. With the tips in this article, that process will hopefully be a little easier.