The year 2008 represented the worst economic crisis America faced since the Great Depression. The recession not only affected the U.S., but soon spread to other regions that do business with America. Fortunately, through the efforts of governments, corporations and individual citizens, the economy is recovering.
Still, most people have a long road ahead to fully recuperate. Here are six things you can do expedite this process for your own personal finances.
Eliminate debt by not creating any in the first place. If you can avoid taking out loans or making purchases on your credit card that you can’t pay back immediately, do so. Avoid borrowing money from friends, or even from yourself. Many of us love to take money from our savings or next month’s check to buy something we think we need this month. Eliminate this terrible practice if you want to improve your financial health.
Still, sometimes we need things that we simply can’t pay for in cash. Whether it’s buying a new house, a new car, or paying for school, getting a loan is sometimes inevitable. In these instances, look for offers with the lowest interest rates for the longest payback periods.
When the time to pay back comes around, pay early and pay more than you need to. This helps to pay off the loan sooner and often causes the company you borrow from to lower interest rates to reflect the low risk of regaining their funds from you.
Make a Budget and Stick to It
After seeing several A-list celebrities go bankrupt, you should know that a budget is necessary for everyone – no matter how much you make. Budgets not only ensure that you meet your current financial obligations. It ensures that you set a little something aside for a rainy day.
The most adept at budgeting can do this in their heads, on paper, or on a simple excel spreadsheet. However, for the less experienced or just less disciplined, one of several apps can jumpstart this process for you. We included a few of them below:
● YNAB (You Need a Budget)
● Mint: Personal Finance & Money
● Goodbudget: Budget & Finance
● My Budget Face
● Wallet – Budget Tracker
Build a Retirement Plan
Saving represents one way to prepare for the near future, but you also need to make specific plans for retirement. If you don’t already have a 401k or an IRA, start one today. Most plans are simple to set up and only require a small deposit to get you started. Get both plans, if possible.
This ensures that when you get older and can no longer work, you can rely solely on yourself for financial support. Pay for your own bills and hobbies, or book yourself into a retirement home. This is especially important for adults who cannot or do not plan to have children. Some employers even match your contributions to your plan. This money is a free addition to your compensation, so do not miss out on this opportunity.
Create Residual Income
Residual income is money that you earn passively with little direct work involved. It sounds too good to be true, but legitimate streams of passive income do exist. However, do not confuse these with “get rich quick” schemes or a situation of getting something for nothing. Reaping the benefits involves some investment and time.
Here are some examples for you to look into:
- Put ads on your website or blog with Google Adsense
- Invest in dividend stocks and build a portfolio
- Invest in bonds
- Rent or lease real estate property, tools or machinery
- Use credit card/ cash-back rewards
- Invest in a vending machine, such as, a soda or gum ball machine
Put this residual income towards paying off debts or investing in solid purchases like businesses or a home. The increase in revenue might tempt you to splurge, but never increase expenses to match increased income. Spend what you need, make room for the occasional treat, and save the rest.
Do Regular Maintenance Work on Your Car
Driving serves as one of the most convenient luxuries of modern life. However, it also ranks as one of the most expensive. Investing in a car not only helps get you where you need to go faster and boosts your independence. It also sucks up money in additional cost. While things like insurance and even car loans are usually unavoidable, some costs are.
Avoid hefty repair costs by doing proper maintenance work on your car in a timely manner. This keeps your car running smoothly and ensures that it always gets you to where you need to go. It also ensures that your car retains the optimal resale value should you later want to trade it on for something else, sell it to pay off debt, or upgrade to something else.
We provided a checklist of some important maintenance work you need to keep up-to-date with below:
- Check your fluids
- Check and change your oil regularly
- Change your spark plugs
- Get your tires rotated and balanced, and get your alignment checked
- Replace your engine and cabin air filters
- Check your battery and clean the contacts
- Replace your windshield wipers when they become streaky
- Inspect and get your timing and serpentine belts replaced when necessary
Get Expert Work done without the Experts
Learning to do things yourself saves on a lot of money that would otherwise go to professionals. However, make sure you practice and experiment on a small scale first. When things go wrong, it often costs even more to fix it than if you used a professional in the first place. Really educate yourself and ensure that you know what you’re doing before taking on dangerous or costly tasks.
Since, we can’t do everything ourselves, look in your network for friends who possess skills in certain areas. Maybe you know a guy who can fix laptops and phones. Maybe you know a girl who does exceptional work with hair and make-up. What about someone handy who knows plumbing or mechanic work? Sometimes these amateurs do even better work than the experts, and not only do they charge less, but they often do this work for free.
There are many creative ways to get on top of your finances and new ones keep surfacing every day.
Apply the ones we shared to improve your financial health and stay on the lookout for other suggestions!
Jonah Engler is a financial expert who hails from NYC.
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