IN everyday life, you may be confused with the various financial needs such as paying bills, paying off debt, pay insurance, to set aside money for savings. Then, the needs which should be prioritized? See the explanation of the financial columnist Liz Pulliam Weston of MSN Money below, to help you manage your finances better:
1. Paying bills
Your ability to manage a variety of other financial priorities will be greatly increased when you are able to handle basic household expenditures. According to financial expert Elizabeth Warren, you are advised to limit spending’’shall”to 50 percent of total income tax deduction.
There is no mandatory spending that, according to him, including shelter, utilities, transportation, food, insurance, child care and the minimum payment loan. Meanwhile, 30 percent of revenue can be allocated to meet the”desire,’’such as new clothes, entertainment, and vacations. While the rest as much as 20 percent for savings and debt repayment.
If your mandatory spending swelled from 50 per cent share of after-tax income, you can control it by cutting spending on food and utilities. If not, you have to make further adjustments to find a cheaper place to live or get rid of the luxury car from the garage.
Are not recommended is to cut your insurance coverage, which is a protection for you if disaster, accident, or illness.
2. Save
Set aside some amount for savings in bank savings accounts can save you from the risk of late payment of bills. Having at least Rp 5 million in deposits in savings, allowing you to pay for small emergencies without having to charge the credit card.
3. Retirement Savings
How much money should you save for retirement? Liz Pulliam Weston of MSN Money suggests you set aside 10 percent for basic savings, 15 percent for comfort, or 20 percent for the breakout.
If you start saving early retirement at the age of 30, set aside 10 percent of income should be able to cover basic needs in retirement. While setting aside 15 percent of income will give you a more comfortable life. If you set aside 20 percent of revenue, you should be able to enjoy luxuries such as early retirement or travel extensively.
4. Pay off debt
It’s time to solve credit card bills and other dangerous debt. The best way to do this is to pay the debt with the highest interest as a priority, while paying the minimum payment of other debts.
But, you also can pay off the smallest debt first, to provide a psychological boost in pay off other debts.
5. Emergency Fund
Savings can be exhausted quickly if you lose a job at any time. Therefore, make sure to set aside funds amounting to at least six times monthly revenue or expenditure shall, as an anticipatory action.
6. Long-term disability insurance
Someone earning power is its greatest asset. Meanwhile, the opportunity for someone to defects resulting from accidents or injuries while working higher than the risk of death in the same period.
The easiest way to get a guarantee of protection is through your employer. If companies do not offer such protection, look for insurance that provides protection against risks of accident and disability.
7. Saving for college
If you already have a retirement fund savings, pay off debts, and having an emergency savings fund, it was now time thinking about the future of your baby. The easiest way to do this is to open an education savings or education insurance, which can be withdrawn automatically from your savings account each month.
8. Experience spectacular
Once you successfully manage every financial priorities above, it is time to set aside money for something fun like a special trip, family reunion, or a sabbatical.