5 Ways to Secure Your Financial Future
I wish I could wave my magic wand and be rich, but alas, I have to explore all the ways to secure my financial future. Moreover, we live in a society where most schools teach very minimal financial education, so, I believe its vital to think ahead and keep yourself informed and know what the heck is going on with your finances. For this reason, I’ve compiled amy 5 Ways to Secure Your Financial Future ( now I only wish I had started these in my 20s).
Here’s to a better financial future!
5 Ways to Secure Your Financial Future
A 401(K) PLAN MAKES IT convenient to save for retirement. The money is automatically withheld from your paychecks before you ever get a chance to spend it. Oh, and you immediately get a tax break on your traditional 401(k) contributions, and sometimes your employer contributes money to the account as well. Some workers are even automatically enrolled in the plan without having to fill out any paperwork or make saving and investment decisions. Its like free money. It also reduces your taxable wages, hello win!
Fund an IRA. Don’t work for a company with a 401k? (That’s me) You can defer paying income tax on up to $5,500 that you contribute to an IRA. And investors age 50 and older can save as much as $6,500 in an IRA. Couples can contribute $5,500 to an IRA in each of their names, even if only one spouse works, for a total of $11,000 in tax-deferred savings. And if both spouses are age 50 or older, they can shield as much as $13,000 from income tax in a traditional IRA in 2015. Income tax won’t be due until you withdraw the money from the account. IRAs also give you a greater variety of investment options than 401(k) plans, and you can shop around for accounts and funds that charge especially low fees.
Open a Roth IRA. Roth IRAs have the same contribution limits as traditional IRAs, but they are taxed differently. You contribute after-tax dollars to Roth IRAs, and then you can withdraw the money, including investment earnings, tax-free in retirement. So, its not pre-tax dollars you contribute, but its not taxed on the other side, i.e., you don’t pay any tax on the earnings, and the withdrawals are tax-free. You can contribute to both a traditional and Roth IRA as long as your deposits to both types of accounts don’t exceed the annual contribution limits.
Use a taxable investment account. If you are able to save more once you max out an IRA, you can contribute to a taxable investment account. While you won’t be able to defer taxes on this account, you can minimize taxes by putting highly taxed investments in your retirement account and holding investments taxed at a lower rate in your taxable accounts.
2.Record Your Finances Monthly: The hubs is adamant about this one. He developed a spreadsheet that has categories for everything including recurring expenses, the tax tables, etc… We use categories like groceries, entertainment, house projects, personal care, clothing, fitness, charity, and Evelyn. This allows us to see where most of our money is going, as well as what we are putting into savings, investments and the like. WE have a budget for each category and just monitor it as we go.
3.Transfer Money Automatically: First, if you do not having savings goes, get ya some right now. Then, have any money that you have earmarked for savings, or a 401k, etc.. to automatically transfer or deposit into those accounts. Same day, same amount every month. This doesn’t mean you can’t add more, but at least you have a goal every month and you won’t try and spend the money instead of saving it. We treat these items like any other bill we have to pay.
4.Pay Off Credit Cards Monthly: You should pay your credit card balance EVERY SINGLE MONTH! Carrying a balance is like giving money away. I know its easy to put on the card than you have, but just don’t. If you treat our credit card like a checking account you will spend less because we all know being overdrawn is the worst. Trust me!
5. Mobile Banking: Ya’ll do yourself a favor and mobile bank. Being able to log in, deposit checks, transfer money, and see what I’m spending makes life so much easier. Most banks also allow you to set up spending alerts and fraud alerts. Plus mobile check deposits? No more hoarding checks until I can make it to the bank to deposit them. Note that your deposits are FDIC insured up to the allowable limit.
Have you started securing for your future? At what age did you get your first savings account? We have one for E as well as an educational 529 and some other accounts geared towards minors. But, we are teaching her that she has to save her money to buy things she wants.