Every financial situation is different, so financial planning should be crafted according to every particular situation. There is no such thing as one-plan-fits-all, but there are some rules of thumb that can be generally applied.
If you are struggling with your budget, here are some rules of thumb that might help you get your finances on track:
1- Don’t let your debt get out of control
If you are trying to repay your debt, whether it is a student loan, a credit card debt or any other kind of debt that you are trying to manage, stay on top. Ideally, your monthly debt payments shouldn’t exceed 36% of your gross monthly income.
If you have a costly debt, like a credit card debt, find ways of minimizing interest charges. You can look for a 0% balance transfer to minimize the total amount you need to repay.
2- Try to save at least 10% of your income
You should aim to save 10% of your income every month, considering you are saving additional money into a retirement plan. This 10% will be ideally used for an emergency fund, in case something unexpected happened. This way, if you need the money, let’s say, for an unexpected medical bill, you will be able to cover the cost without having to incur in debt.
However, you can use the 10% rule to save for different goals.
As for retirement, there is no rule when it comes to how much you should save, but if your company offers a 401(k) and a matching contribution benefit, you should aim to contribute at least as much as your employer.
3- Keep your house debt on track
A huge part of financial planning is calculating how much you can spend on a mortgage. Using the 36% rule as a guideline and keeping in mind all your other expenses, figure out how much you can spend on a mortgage payment without exceeding the cap. Another rule for housing is that it shouldn’t cost more than two and a half to three times your annual income.
If you follow these rules, you will be able to keep your finances on track. Of course, there are a lot of other things that will apply to your particular financial situation, so be sure to create a well-crafted plan!
Tips that can help you pay your bills
The Coronavirus recession had an impact on jobs and millions of jobless Americans are now struggling to pay their bills. Check out these tools that can help you pay your bills!
Paying bills has become a struggle nowadays due to the economic crisis that was triggered by the Coronavirus pandemic. Many jobless Americans are now worried that their bank account may be drained to zero.
If you are finding it hard to keep up with your monthly bills, there are some tips that may help. Take a look at these tools that can help you pay your bills.
• Calendars & notifications
First things first: To stay on top of your bills during a crisis you should know when they are due and when you need to pay them. This is why a bill calendar or bill notifications can become handy.
A bill calendar is a calendar in which you can write down due dates and amounts. Having one -either digital or physical- will help you keep up with the bills.
Bill notifications are alerts (text or email) that you can set up a few days before the due date to remind you that the time to pay is approaching. You can even use online or mobile banking alerts to help you.
• Expense trackers
This tool will help you track your expenses, help you understand your spending and identify what you can cut.
You can either use a spreadsheet, a budgeting worksheet or an expense tracking app. You can also track your expenses by checking your bank account and your weekly activity.
• Debt tracking
Having a debt tracker can help you prioritize your payments. This way you can check how much you owe, the minimum payment due and the interest rate. If you don't know where to start, you can find a free debt tracking sheet at the CFPB.
• Credit monitoring
If you are late or missed payments, even if it's just for a few months, your credit score can be severely damaged. So, it's better if you keep an eye on your credit. An interesting (and free) tool to check your credit report is through AnnualCreditReport.com.
Benefit from personal finances blogs
Many of us have grown up watching our parents struggle with money and don’t want to end up the same way. Personal finance blogs are a great way to start learning.
We all finish school or college with completely different knowledge about personal finance but, in most cases, we aren’t at all prepared to succeed at it. However, there is no need to panic. No matter how much you know, or what your situation is, there is surely a blog that meets your needs.
Here is a list we put together of the top 5 personal finance blogs for young adults to help you start creating a financial plan.
Unlike other millennials, Erin Lowry, the author of this blog and the book Broke Millenial: How to Stop Scraping By and Get Your Financial Life Together, isn’t broke. She is a personal finance expert who created the blog to help millennials get their financial life together. She understands that it is a struggle for many young adults and that is why she created an interesting and easy to read the blog to appeal to her peers. Broke Millennial can give you a good base to get serious about financial planning. There is no need to have any financial background to understand this blog because it isn’t too technical and uses simple language
Like many Millennials, student loans are what drove the author, Robert Farrington, to start writing in 2009 to figure out his financial situation. In his blog, he turns his experiences into practical advice for others who are in that same situation. The College Investor doesn’t believe you’re ever too young to start taking care of your financial plans and to start thinking about your investments. For any young adult who is wanting to invest and isn’t sure where to begin, this blog is the right place to learn.
Jonathan Ping describes himself as a “father, husband, self-directed investor, financial freedom enthusiast, and perpetual learner” and has been sharing about money since 2004. His blog is about learning about finances, retirement and preparing for the futures He and his wife are half-time workers and their passive income is enough to cover their household expenses.
Kelly Whalen, the author, is a mother of four and started her blog in 2009, She started The Centsible Life to write down how she was able to get her family out of debt. Soon after starting, she realized that others just like her, trying to get out of debt, were finding hep in her posts. She describes her blog as “my corner of the internet, where I help women live happier, healthier, and wealthier lives”.
This blog, created by Bridget Casey in 2012, is an online financial literacy resource for young professionals who want to build long-term wealth. Her niche is helping young adults figure out how to pay off your college debt, start investing or plan for retirement. On the site e-courses and workshops are offered and thousands of millennials have already learned how to stick to a budget and achieve long-term goals.