Sunday, March 27, 2011

Personal Finance Management - Stay An Edge Over Others And Avoid Debt

Making financial resolutions to improve your financial state is always a good thing to do but it only makes sense if you follow them. There are many people who take New Year resolutions but forget about them after the very first month. They’re back to their reckless spending habits and this gets them into serious financial trouble when they incur debt and are confused about the ways of repaying them. Though you can settle your debts by do it yourself debt settlement, it is better to go for personal finance management to avoid falling into dire financial circumstances. Regardless of your age, you must practice personal finance management and make sure that your finances do not get haywire due to mistakes committed by you. Here are some personal finance tips that you must follow to avoid falling in debt.

1. Create a savings account: Keeping enough cash available for the future is the first and the most important step towards your personal finances. Most financial experts recommend that a person must save at least 10% of their monthly income in order to keep a lump sum amount of money ready during financial emergency. You must open a savings account with a reputable bank and tie that account with your salary account. This will not bar the savings if you forget to keep aside money in your savings account.

2. Invest money but diversify your portfolio: If you want to boost your income resources, you must try your luck in the investment market. The investment market can assure you certain returns but you must never invest all your money into one particular instrument. Most investment experts are of the opinion that one must spread his risks to minimize them. If you invest your entire funds into stocks, you might be subject to loss with the stock market crash. In such a situation, if your funds are diversified, you can maximize your returns.

3. Pay off your high interest debts: If you wish to repay your debts and lead a debt free life, make a list of your debts and categorize them according to the interest rates. Prioritize your credit card debts and make sure you start off with the high interest rate debts. This is known as the debt avalanche method. You can also try do-it-yourself debt settlement and pay off a reduced amount and become debt free sooner.

4. Contribute to your retirement account:
If your employer offers a retirement account like a 401(k), you must not make the mistake of not contributing to it. Everyone loves to invest in the 401(k) account as it will give you back tax deductible returns and make your retired life peaceful. If you want your golden years to be spent without debt, you must take all the possible steps towards retirement planning and saving for retirement.

5. Keep reviewing your credit report: You must take out a free copy of your credit report and check whether or not there are any errors. As there is a sudden increase in identity theft, you must always beware of the consequences of dealing with financial problems that are caused by the identity thieves. Dispute any error that you spot and make sure your credit report is error free so that you can open up your options of receiving new lines of credit in the near future.

A frugal budget can help you live within your means and leave behind debt. Follow the personal financial tips mentioned above so that you do not require seeking help of debt settlement companies or go for do-it-yourself debt settlement. Resolve to make improvements to your spending habits and be more financially dedicated to stay debt free.

2 comments:

  1. I have fun read this posting. I need to see more on this subject.. Many thanks for publishing this good information.. Anyways, I’m gonna sign up to the rss as well as I hope you publish useful posts once again soon.

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  2. These are great tips. Saving always works best, although it's not a bad idea to take out loans in case of emergencies as long as you plan ahead.

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