For years, investment advisors have been writing about how if people only started to save and/or invest earlier in life, most of their money issues later in life would be solved. Obviously, some issues arise unexpectedly but, for the most part, you will have a better chance of retiring early, traveling more and being able to spend more time with your family and grandchildren if you start early.
But with all this advice in books, magazines and online, people in their 20s are still not beginning all that much earlier than their parents did. Perhaps, it's a case of like father like son? Or like mother like daughter? We'll show you how to take a few easy steps to turn around your financial future from stressful to stress-free by taking control your current situation.
Make a Pledge
To begin, you should make a pledge to yourself that over the next three days, you will:
- Plan on taking four very easy steps to increase your chances of having a secure financial future.
- Promise yourself today - right now, this minute - that you won't be surprised by financial windfalls or pitfalls in the future because you're going to plan accordingly.
Step by Step
Does it all sound too easy? Well, it is. So, let's get started. Here are the steps:
- Get a file system and get the folders to go with it. They are pretty cheap at your local office supply store. A simple file cabinet (plastic or otherwise) and some simple file folders are all that's needed here.
- Get your most recent credit card statements, phone bills (if you pay online, print a copy), insurance information, your user names and passwords to websites, etc. Make sure to get basically everything that you could look for later but usually can't find right away when you need it - like the receipt for that wedding gift you have to return or your eBay password you can never remember. Now file all these statements, bills and receipts into the filing system you just bought. It generally helps to have the most recent document to the front of the file, but how you choose to file will depend on your personal style.
Make sure to keep adding to these folders as new bills and statements come in. Your goal here is to keep these files organized and up to date so you can always find what you're looking for when you actually need it.
- Get your credit report. There is a very good website called AnnualCreditReport.com (U.S. only). Here you can get a free copy of your credit report from all three major credit bureaus. You don't need to spend money anywhere on this site. It's free. Just log on and begin by putting in what state you live in and it will prompt you through the rest. It's very easy and it will probably take no more than 20 minutes. (To read more on this topic, see The Importance of Your Credit Rating and How is my credit score calculated?)
You should order these reports because you need to make sure that as you start out on your journey, you can begin making decisions based on accurate information. Knowing your credit and where you stand is always a good place to start as you begin thinking about making financial decisions. (To find out how to start getting out of debt, see Digging Out Of Personal Debt, The Indiana Jones Guide To Getting Ahead and Competing Priorities: Too Many Choices, Too Few Dollars.)
- Now that you have all this information on hand, you'll be able to start figuring out where you currently stand. Begin by looking through all of your most recent bills and see whether there are any expenses that you can eliminate without changing your lifestyle too much.
For example, if you have a mobile phone, do you use all of your minutes each month? Would it make sense to get a charged a fixed monthly fee for unlimited text messages or are you paying for each on an individual basis? Could you cut back your minutes to save a few bucks?
Also look at your credit card statement(s). If you have more than one card on which you currently have an outstanding debt, you should concentrate on paying the most money to the card that charges the highest interest rate. If that means making minimum payments to your lower rate cards for a few months, so be it. (To read more, see Take Control Of Your Credit Cards, Credit, Debit And Charge: Sizing Up The Cards In Your Wallet and Understanding Credit Card Interest.)
Take a look through your credit report. Do you see anything that looks suspicious? Go through each line and make sure you can explain what it is. If you find mistakes or odd entries that don't appear to make any sense, there are directions on your credit reports to show you how to go about fixing or inquiring about the suspect transactions.
It will feel good to know that you have all of your finances organized. Understanding where you stand will help put you in control of your finances, rather than letting them control your life. The minimal work you put in today will pay great dividends someday when you are flying off to a tropical island or retiring a few years ahead of schedule.