This article, written by Denise Boone-Bennett, originally appeared on April 29, 2016 in the Michigan Chronicle.
Steps to help you improve your financial life
As we reach the mid-way point in the year it's a good time to review your financial goals. To arm people with tools to tackle their finances, Bank of America has partnered with online educator Sal Khan and Khan Academy to build BetterMoneyHabits.com, a free online resource that provides simple, straightforward advice to help situate people for financial success. The site, which is available to all, offers objective and engaging content and tools on a wide range of personal finance topics.
Here are a few things to keep in mind to build a solid financial foundation to help achieve your short and long term financial goals:
- Set a budget. First things first: how much money do you have coming in, and how much is going out? Think of your budget as the map to reach your financial and personal goals. This knowledge can keep you from overspending each month.
- Set a savings goal. With a budget in place, you will know how much money you have leftover to save for your goals.
- Be ready for an emergency. An emergency fund is an important step to financial security. From car and home repairs to veterinarian bills, unexpected expenses can set your financial world into a tailspin. Experts recommend tucking away at least three months worth of your living expenses for emergencies.
- Tackle debt. If you have debt, it is imperative to eliminate it, particularly credit card debt. Managing your debt and savings go hand in hand. If, for example, you have high-interest rate debt it may make sense to pay it off, even before saving for your emergency fund.
- Plan your retirement. Financial planners recommend retirement saving take precedence over any other savings, including for your child’s college education. The best way to save for retirement is set up a tax deferred, retirement account and commit to regular contributions. Employer plans, like a 401(k), usually allow you to automatically set aside a portion of your check to build the account. If a 401(k) is not an option, you can contribute to an Individual Retirement Account (IRA). Self employed individuals and small business owners also can save for retirement with tax deferred benefits through a Simplified Employee Pension Plan, or SEP IRA.
- Look to the future. After you have set up a retirement plan, there are other long-term priorities that must be considered, such as your child’s college education or the care for an aging parent.
- Set your short-term goals. Once long-term savings priorities are addressed, start making a list of your goals for the next five years such as vacations or home remodels. It is often helpful to open a dedicated savings account, which you contribute to weekly or monthly for these big ticket items.
- Managing money can be an art. If it feels like you aren’t contributing as much to your short-term savings goals, get creative. Things like starting a change jar or holding a garage sale or selling unwanted but valuable items on eBay, can add up.
BetterMoneyHabits.com provides people with the educational resources they have asked for and is available when they need it. The content on the site, which is refreshed regularly, delivers unbiased and easy-to-understand information on a wide range of personal finance topics.
We hope you take advantage of this free resource, and that you make a commitment today to improve your financial future.