Simple rules are road map to financial freedom
As our country struggles to control spending and reduce its debt, maybe it is time for each of us to get back to the basics of personal finance.Here are some time-proven principles you can follow:
Set goals: When do you want to retire? Be debt-free? Pay off your home? Pay for a car with cash? Setting goals tends to move us in the direction of accomplishing them.
Get on a budget: A budget is really a spending plan. Keep it simple and practical. The idea of a budget is to spend less than you make.
Eliminate credit card debt: This is a priority because it's almost certainly the most costly debt that you have. Credit card interest rates can easily run in the mid-teens. Expensive credit card debt can destroy other really good financial opportunities. Once the debt is eliminated, pay off the balance each month -- or, better yet, don't use the card except in an emergency.
Delay gratification: In other words, distinguish between your needs and your wants. By delaying gratification, we build discipline and establish control of our financial lives.
Pay yourself first: Savings should be your priority. Don't try to save whatever is left at the end of the month. Decide how much you are going to save and then set up an automatic deposit from your paycheck to your savings account.
Start an emergency fund: This fund should cover three to six months of living expenses. There will always be financial emergencies -- car repairs, furnace breakdowns, medical expenses, losing your job, etc. Be prepared for them by building this fund.
401(k) retirement accounts: Fully fund your retirement accounts and resist (except in extreme emergency) borrowing from them or withdrawing from them.If all of us would follow these principles on a continuing basis, we would build a better future for ourselves, our community and our country.
Walter R. Willms is a certified financial planner. This column is provided by the Financial Planning Association of Greater Indiana.
