I’ve got my money under control, now what? How do I manage the money that I have saved? What if I still have some outstanding debt that is lingering? I’m glad you are asking these questions, because the last thing I want is for you to end up back in a downward spiral of endless debt. Who wants to be a slave to credit card companies and financial institutions?
Once you have reached your financial freedom by eliminating most or all of you unnecessary debts, it doesn’t end there. Your developed personal budget will always keep you on track with your finances, as long as you stick to it and not regress back to old habits, which can be very tempting. Not controlling your spending patterns will only lead you down another path of despair than will have more of a negative impact on your future than it did before.
To enjoy your life well into your golden years, continue on the right path of less spending and more saving. The small steps that you have taken are now large steps into a future with a peace of mind about your finances. Worry is gone, and you can focus on other things that life has to offer, as well as being prepared for life’s unexpected happenings. Take management of your future with these seven guidelines to a secure future.
1. Stop using any form of credit.
If you can’t afford to pay with an expense with cash, than don’t buy it. Live on the money that you earn. There is a false sense of wealth associated with credit card use and new highly advertised home equity loans. Credit card companies will entice you to spend more by frequently increasing your credit limit, now that you are debt free. It may offer low introduction interest rates and easy to use pre-printed checks. Decline the card and shred those checks. The last thing you need is to be swallowed by debt again. Use cash, debit cards, or order online personal checks that are inexpensive and give you the freedom of living within your means. Mostly all business establishes now accept debit cards as credit cards, so there is no reason to have a credit card.
Also be leery about taking out a home equity loan, unless absolutely necessary for expenses such as tuition, or a large unexpected medical expense. Home equity loans are being advertised for people to use to take those long-needed vacations, make that large home extension, or buy that luxurious item that you’ve been wanting. Again, practice good money management needs and analyze if this is a necessary purchase or not. Most times, it is not.
2. Put your savings into an emergency fund
This savings fund should be separate from your regular savings, as these monies are to be used only in the strictest emergency situation. It is not to be used for a vacation, or holiday presents. This is the money that can be used for an unexpected large car repair bill, medical bill, or to replace a household item that has broken down. This fund can continue to grow, and if you are fortunate and don’t need to tap it for anything, it will become a nice additional savings for your retirement.
3. Put your savings into a living expense fund
A percentage of your income should also be placed in a separate account worth six months of general living expenses. This money is only to be used for the unlikely event you or a household member becomes unemployed or disabled. The money should remain and collect interest in this account and not be touched for any other reason. Once you’ve hit the savings goal in this account, let it sit, as your additional savings will be placed in your emergency fund.
4. Bill consolidation
If for some reason you still have a lot of credit card debt with high interest rates, consider a loan consolidation. This will decrease the interest rate you pay on the cards. The financial institution that you obtain the loan consolidation from will pay off the balance of your card and you then must close that account. This will keep you from adding more to your debt, and allow you to pay off your debt at a faster rate with minimal interest. Some financial institutions also allow you to borrow on your own money for a loan consolidation, which will allow you to retain your savings while paying off your bills. So essentially, you borrowed from yourself.
5. Remain on your personal budget plan
Continue to follow your monthly personal budget plan. The extra monies saved each month should be applied to any outstanding debt, put into your emergency savings, and put into your living expense fund.
6. Live your new lifestyle
Remain dedicated to your budget and savings plan. Manage your money well by paying close attention to your bills and expenditures, while not creating new, unnecessary bills. The longer you remain on your new lifestyle plan, the more common practice it will become.
7. Never leave home without a list
No matter what you need to shop for, create a list. A list keeps you on track and you will be less likely to become distracted with other items in the store that look interesting. The feeling you get when you come home, and look at what you spent only on necessities, and the money you saved from avoiding buying another new bedroom comforter set, will create such a feeling of accomplishment for you.
Take time each month to review your budget monthly and make necessary adjustments. The money you save each month should equally be deposited into your savings accounts, and to pay off any lingering credit card or loan debt. Remember to pay with cash, credit card, or order your checks with check coupon codes for discounts. Be smart with your money and Invest in your future for a life of enjoyment free from the worries of money.
About the Author: Residing in Minnesota, Joe Johnson has been active in online communities for over 15 years. He enjoys helping families and individuals understand the importance of personal finances, such as saving and budgeting money, by contributing articles to related online web sites.