In today’s fast pace world it is hard to find time to do anything besides work or errands. Unfortunately our personal finances get pushed to the back burner. For those who are single managing your finances might come easier due to less distractions but for those who are are married and have kids, it can be a nightmare just to find time.
It is crucial for married couples and their financial long-term well-being that they put into place certain steps that will cover all the basics, so in the end they are only spending a couple of hours a week managing their money. Here is the plan.
Communication is key – In week one you and your spouse need to sit down for 45 minutes and discuss what your financial goals are. Each person should make note of what goals are important to them and share with their partner. Any overlapping goals should be pulled out and placed in the order if importance. From there the top three survive.
Be prepared for an economic downturn – It is very well know that each person or family should have cash reserved just in case of an emergency. Who knows, illness might strike or a job might be lost. If this were the case it is vital you have enough cash to survive the following months. It is disputed on much you should keep stashed away. I recommend 6 months especially in an economic downturn. I feel safe to say that is what we are currently experiencing.
Your life has a price – it is important to review your life insurance policy. Your benefit should equal 5 to 10 times your salary. The more kids you have the better off you are being the higher end of the number. So as your salary increases so should your life insurance. You could always check for qoutes at insure.com.
Paying Bills Online – There is no better way to reduce the time needed to pay bills then to set them up on autopilot. This can be done by signing up with your bank for online bill pay. No more late fees and better yet no more $.42 stamps. If you cannot set up a certain bill with your bank then I am sure if you logged onto the companies website you would be able to pay there. This seems so simple & painless, it is shocking to me that only 24% of Americans pay this way. Let’s wake up people.
Keep it simple stupid with your 401K – Why would you want to manage two dozen funds in your 401k? Not many people so why not reduce down to a one target-date fund. You get to keep the luxury of having a diversified portfolio while while knowing you have a hands-off investment. If your 401k does not offer a target fund, then only carry three index funds. Money magazine recommends one total domestic stock market, one total foreign and one bond.
Create a direct deposit with your other investments – Lets think about this. You automatically contribute to your 401k and most likely save more than you would by manually contributing. You don’t have to worry about it. Same can be said with your other investments. All you need to do is set up a recurring transfer each month to the specified accounts and saving gets that much easier. It might take some thought at first since you will need to decide on what allocation is best for your situation but in the end it will be a timer saver.
Shred the plastic – Finally, the not so fun part. Time to cut up the plastic. Do not worry, you are allowed to keep one credit card. I might have been a little harsh with saying you need to cut the plastic. Actually I meant store the credit cards away in a safe place. Keep the card with the lowest interest rate to use. By keeping the accounts open it will not hurt your credit score. Closing the accounts will hurt your credit score. Pay off the balances on the card you choose not to use and enjoy a life of fewer bills.
By following these steps managing your finances will be a breeze. The bills pay by themselves, your 401k grows out of control and you now have enough cash to withstand the worst economic downturn of our lives.
Related Posts: