Following a set of guidelines on personal finance will prevent you from going into debt or experiencing a financial crisis. You could have excellent investing skills, but if you can’t save money, you will constantly feel disempowered. Saving money should always be thought of as more important than investing because of how it precedes good investing skills. Let’s have a look at a set of rules to make your personal finance better.
Say No to Credit Card Debt
When we say don’t take on credit card debt, we don’t mean to not use your credit card. Instead, we mean that you should not allow your account to hold debt on it. Pay off the debt at the end of every month to prevent interest charges. Do a comparison to find the best credit cards for you whether it’s one that accumulates airmiles or cashback. Once you allow the debt to accumulate, it will grow quickly in interest charges.
Send the highest payment that you can afford and pay off the account as quickly as possible. You may want to reduce spending in other areas to allow for faster savings. Credit card debt carries some of the highest interest rates in the industry with the average rate set at 16 percent, and 24 percent is not uncommon. They have a higher interest rate than mortgage or auto loans. There are financial habits that can make you wealthy or halt your efforts completely and a high level of credit card debt is certainly the latter.
Take Out a Home Equity Line of Credit
Taking out a home equity loan lets you borrow money against the equity of your home. The strategy hands you additional cash for paying off debts that are costing you more money to leave unpaid. For example, you might take out a home equity line of credit (HELOC) to consolidate high-interest debt under a lower interest rate. To get the best rates, you will need a high credit score. You could take out a home equity line of credit to pay off large expenses as well, such as a medical bill or a home renovation. As long as you have 15 to 20 percent equity in your home, getting a HELOC isn’t impossible.
Don’t Mistake Income for Savings
Income looks at how much you earn, while savings look at your money management skills. Financial experts advise you to pay yourself first before you do anything else. Despite that advice, precious few people keep a good savings account built up. Having a healthy savings account will provide you with greater security in the event of an emergency. Income is what you have on hand, and savings is what you keep for investments and a margin of safety.
Get the Employer Match
You want to put away enough money to take full advantage and have your employer match your 401(k) plan. Many people don’t put away enough into their 401(k), which leaves money on the table. At the minimum, you should save enough to get the match. While you may not get this cash right away, it is literally free money built up for your retirement savings. Having a 401(k) will also give you a tax break with the money contributed.