Most of us go on the assumption that we always have time to get things in order, no matter what those things are. Then suddenly we’re surprised by something we weren’t expecting and we start scrambling to recover and address it.
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Unfortunately, this is a myth; it’s not true. Only the richest of us are ready for a catastrophe that’s going to cost money we hadn’t planned on spending. Well, that’s not quite true. Another group of people, hopefully some of us, are also looking at our financial situation and making plans for everything financial. Not just for emergencies but doing a little bit of long term planning, taking care of short term issues, and everything in between. Think about it this way; we’re either continually progressing, regressing, or stagnating; which one feels the best?
In that vein, here are 5 financial issues that you should plan for that covers some part of all of the things mentioned above and help push things forward in your financial life. They’re not necessarily easy, but if they were then where would the pride come from in doing great things for yourself? Here we go:
1. Get your taxes out of the way.
Whether you’re self employed or working for someone else, hopefully you’ll be ready for tax season when it comes around. For most people, their employer is taking a chunk of your pay and sending it in for you so your effort is minimal. But what if you’re self employed or own a business?
Hopefully you’ve pulled together everything you need to get your taxes to your accountant or tax preparer, or even if you’re doing your own, so you can get this over and done with as soon as possible. Have you been paying something quarterly? Have you been collecting sales tax (if you live in a state that has them)? It’s always better to plan ahead so that the process goes easy on you. If you can afford it, pay a little extra… or do a bit more of #2 below.
2. Think about investing some of your money.
The economy is getting better, even if it’s moving slowly, so it’s a good time to think about doing something with a portion of your money to work towards your future. While putting money in a savings account is safe, you also won’t generate almost anything from it. There are lots of different plans to look at, some that will pay you 3.5%, some that might pay more than that. Find a financial advisor who you can talk to about it.
The thing with investing is that you get to write off what you’re investing, and you don’t have to pay on the gains until you dip into it. A lot of financial advisors recommend paying the minimum amount of taxes required of you and investing the extra bit you’d normally pay so you’d get a refund so your money can grow to help you in the future. Since you get to write it off it might still end up giving you a slight refund while making you richer; that’s nothing to take lightly.
3. Pay down more of your debt.
We all like new things, but interest rates for things we want are higher than any growth of money we might put away for ourselves. Even relatively small increases in monthly payments can help you pay down balances faster, and if you keep a better eye on your purchases, maybe use cash or your debit card more often for them, you can rein in your spending and your debt issues.
This is a long standing topic of conversation; saving money or paying down debt. The way you should look at it is twofold; what are the interest rates and what kind of money are you dealing with. For instance, if you have a mortgage that’s at 3% interest but it’s costing you $700 a month to pay versus a credit card at 19% interest but your minimum payment is $150, you might think you should put more money towards your mortgage. However, the smart move would be to pay off the credit card at an amount higher than the minimum while you also stop using the card and you could pay your credit card off in around 3 years. Look at your next credit card statement; they tell you how much you should pay to get that done.
4. Verify your insurance coverages. This should be something you did before you got it but it’s something you should check. You need to know what your medical insurance won’t cover to see if you should be putting away extra money just in case. Will your life insurance cover the balance of the payment on your home if you or your spouse passes away? How high is the deductible on your car? Does your homeowners policy cover infestations?
Unfortunately, most people don’t pay any attention to these things until something happens. Talking about or researching insurance coverage isn’t the most exciting thing in the world. With that said, it’s probably the most important thing you need to get a handle on; the out of pocket amounts could be pricey, and at least you’d know what kind of money to put away ahead of time.
5. Can you increase your income?
We don’t mean asking for a raise. In the book The Millionaire Maker by Lorel Langemeyer, she talks about helping families find ways of making money based on skills they have, whether they’re related to their job or not. These days it’s known as “the hustle”.
A part time job is one thing; it might bring in a nice bit of change but if you live where there are state taxes you might get a nasty shock at the end of the year. Creating a career based on something you like to do will feel more rewarding, might pay more, and could even turn into a full time thing if you find there’s a serious need for someone with your skills or products, if you’re good at creating things. It’s something to think about.
There are easily more than these 5 financial issues, but it should give you something to think about.