It's been a tough year for investors, but here's some simple advice to carry with you on the road to recovery: Be the light at the end of your own tunnel. Whatever financial issues this recession has caused you, prepare now for a strong future. Not sure how? Read on for a few ways to start rebuilding your finances:
- Set Goals
It's tough to get somewhere if you don't know where you want to end up. Goals are a benchmark to measure your financial progress. You want to retire someday, so calculate how much it will cost. Set goals for all the big ticket things you want to do: family vacation, replace the roof, buy a new car etc.
Take the time to estimate how much each target will cost and keep inflation in mind. Create a timeline for accomplishing each objective. The goals should reflect your current situation whether you are in between jobs, already retired or just graduating from college. (Follow these five steps to manage debt without cutting up your credit cards. Read Define Your Personal Debt Redline.)
- Set a Realistic Budget and stick to it
Use the goals to set up a monthly budget. Here's a budgeting technique:
- Pull out your bank statement and all the receipts from purchases made last month. Make a list of budget items that you may not have paid last month such as annual property taxes, quarterly insurance payments, etc.
- Divide every purchase into discretionary or non-discretionary
- We've all learned to be thrifty during the past year, so apply your new-found skill to each item you spend money on. For non-discretionary items, negotiate the cheapest way to meet the need. For example: shop for the lowest telephone plan. For discretionary items, consider what can be totally eliminated. For whatever is left over search for alternatives to receive the same result at a minimal price.
- Total all expenses and subtract the amount from your monthly income. The result is either a profit to apply to savings or a deficit which requires additional sources of income.
- Fix Your Credit
Don't wait to whittle down debts. Get a copy of your credit report no matter how good or bad it is and establish a plan to make it better. Open a secured credit account. Use it for a small purchase monthly and pay it back monthly. Consider debt consolidations or refinancing. Ask creditors for a lower rate. Set up a payment plan to reduce outstanding amounts.
Protect the credit you have by understanding all the new terms credit card issuers are sending out with statements. Shop around for better terms and rates. (Managing your debt could mean the difference between spending $45,000 or saving $184,000. Read Expert Tips For Cutting Credit Card Debt to learn more.
- Rebuild Your Savings
The Department of Commerce reports that Americans have increased personal savings. Keep it up. If you tapped into your savings due to job loss, make plans to build it to at least 6 to 8 months worth of your monthly income. No matter how little you can afford to put away, every dollar counts. Search for interest bearing savings accounts to make your money work for you while you save. (Find out how to balance living well today and retiring well tomorrow. Check out Enjoy Life Now And Still Save For Later.)
- Invest Now
If you've been sitting on the sidelines waiting for the stock market to rebound, you're missing it. The DOW has been inching back toward the 10,000 mark and new IPOs are launching. Evaluate your portfolio holdings to sell off the dogs and look for undervalued investments to add. Invest based on your personal goals and risk level. (Money is tight, but don't let that stop you from pursuing future riches. Check out Invest On A Shoestring Budget.)
- Grow Your Business
Take advantage of cheap office space by locking in leases. With the job market still lagging, now is a good time to hire contract workers or permanent employees if you can afford them. Request new bids from suppliers to cut cost and use creative initiatives to increase productivity.