When it comes to your personal finances, you are the CEO. That means you are ultimately responsible for making sure that You, Inc. is using its resources wisely and efficiently to advance the organization’s long-term goals.
Here are six ways to ensure that’s happening:
Stop borrowing to buy depreciating assets – Credit is a powerful tool when correctly deployed. That means borrowing to buy things that are likely to give you a return – a house, business or education. Borrowing to buy a car or another item that shrinks in value over time is a mistake. Such consumer debt is the great crippler, limiting your ability to meet current obligations and save for the future.
Don’t buy new cars – See above. Realistically, you will likely need to borrow money to buy a car. But you can limit your debt exposure by purchasing a slightly used vehicle, say two-three years old. This gives you many of the benefits of a new car, including reliability, at a much lower price. If you buy from a private seller be sure to have the car carefully inspected by a professional before sealing the deal.
Limit saving when you are in debt. Once you have established an emergency cash fund of about six months of living expenses, your focus should be on paying off debt. Continue to make your 401k contribution, perhaps at a lower rate, and use every extra dollar to put out that dumpster fire of credit card debt.
Ask for the deal. Flea markets aren’t the only place where you can bargain for a better price. Credit card rates, cellphone plans, internet service, even medical services are all negotiable – but only if you start that conversation. Remember, you don’t get what you don’t ask for.
Mind your credit score. Quick – what’s your credit score? What do you mean you don’t know? This is one of the most important numbers in modern life. It impacts your ability to borrow money, your car insurance rates and potentially even your chance of getting a job. Get a copy of your credit score asap. The major credit reporting agencies are required to provide you with a free report once a year. If your score is lower than 700, start taking steps to improve it. If your credit record is a serious mess, consider hiring a credit repair service like Lexington Law to help you get things cleaned up.
Don’t waste that tax refund. Americans too often treat a tax refund as pennies from heaven, as unexpected money to be used for splurges. No. No. No. That money came out of the annual income that forms the basis for your spending budget. Thus, your refund should be used for a constructive purpose – either placed in long-term savings or used to drop a bomb on your debt.
Implement these changes at You, Inc. and you will see immediate improvement bottom line performance, making you a rock star CEO.