Financial Planning 101
- Pay off your credit cards every month. Too many Americans carry an account balance and that’s not good for your finanical health. Create a systematic plan to pay down balances. Don’t fall into the “0% balance transfer game” as it will hurt your FICO score. Credit scores matter not only to credit card companies but to insurance companies as well; you can avoid an unpleasant increase in your insurance rates by managing your credit wisely.
- Build an emergency cash fund in a high-yield savings account. We recommend 3-6 months, but depending on your situation it could be different.
- If offered, contribute to a 401(k), 403(b) or other employer-sponsored saving plan. Most employers offer a match on your contributions to these plans. If you don’t take advantage of that match, then you’re leaving your money on the table!
- Don't count only on Social Security! Fund your IRA every year if you can. If you don’t fund it annually, you lose the opportunity for long-term growth. Fund a Roth IRA over a traditional IRA if you qualify.
- See a lawyer and make a Will. If you have a Will make sure it is current and valid in your state.
- Buy term life insurance equal to 4-6 times your annual income, and at least enough to cover the balance of your mortgage. Most people don't need a permanent policy (such as whole life or universal life).
- Buy a home you can afford. Maintain it properly. Build equity in your property. Avoid interest-only loans.
- Use passively managed stock index funds or “no-load” mutual funds in different asset classes and direct purchase government bonds to reduce risk, minimize costs and diversify your portfolio.