5 Steps to Strengthen Your Finances

by Melanie J. Martin

You probably have plenty of motivation to strengthen your finances. Enjoying financial security, providing for a family, sending kids to college and saving for retirement are solid long-term goals. Short-term objectives such as saving for a trip abroad or paying for a wedding work as stepping-stones toward financial security. Evaluate your reasons for strengthening your finances to pinpoint what motivates you, and work toward it.

Control Your Debt

With American households with credit cards averaging $10,700 in credit card debt, as of publication, according to CNN Money, debt has become part of the national culture. Control yours by recording all your expenditures, so you understand exactly where your money goes. Pay off debts that command the highest interest rates first, while always paying at least the minimum on other debts. Build up your credit by borrowing what you can afford to pay back for larger purchases, after developing a time frame for paying off the purchase. Apply for a loan instead of using a credit card for large purchases, because loan rates are typically lower.

Invest in Yourself

Purchase health insurance that will keep you and your family financially secure even if a family member experiences a serious accident or illness. A catastrophic injury could keep you in debt long after the family member recovers. Ignoring the need to maintain adequate health insurance could waste all your efforts to strengthen your finances. Also purchase life insurance for yourself and your spouse, especialy if your family depends on both incomes. Ensure you have adequate home and car insurance as well.

Invest Wisely

Start investing as soon as you have enough money to cover your immediate needs and emergency expenses. Stocks provide the highest profit of all types of investments, followed by bonds, says CNN Money. Diversify your portfolio so you don't rely on just one investment, no matter how bright its future looks. Investing in risky investments can pay large sums if they succeed, but put money in sure investments like U.S. Treasury bonds, too. Bonds in general involve far less risk than stocks, so adding bonds to your portfolio would be a wise move. If you have the funds and study the market or gain professional guidance, pursue a more aggressive strategy too by investing in risky but promising companies. Investing in mutual funds provides a wise alternative to making your own investments, if you feel more leery of the market. With mutual funds, a professional investor invests your money for you and takes a small percentage of the profits.

Get Proactive about Your Career

Develop five-and 10-year career plans so you know your goals and objectives. If you're stuck in a rut at your job, search for another one as soon as you've put in enough time, such as one year. If you're a recent graduate, gaining experience even at a low-paying or unsatisfying job might prove worthwhile. However, selling yourself short could prove a greater mistake. Be proactive about your job search, cultivate your interpersonal skills and always go far beyond your boss's expectations. Always tell your boss what you have accomplished, so he doesn't overlook it. Then ask for a promotion or salary raise when the time feels right.

Save for Retirement Early

Ensuring you have enough money to retire requires careful planning and saving. If you begin preparing decades ahead of time, you'll make the process much less stressful. For example, you won't be bombarded by the duel need to pay for your kids' education while trying to put money away for your own future. If your job offers a 401k plan, invest in it. Also consider an IRA account, which lets you defer taxes on money you invest in it. Putting money in your accounts early lets them accumulate more interest, causing them to grow to a far higher sum than they would if you started in mid-life. Ensure you have a pension plan, too. Find out how these plans may change if you switch jobs, and take any necessary steps to ensure the plans carry over into your next position, as the Department of Labor points out. Whether you're 25 or 60, you don't want to miss out on benefits to which you're entitled.

About the Author

Melanie J. Martin specializes in environmental issues and sustainable living. Her work has appeared in venues such as the Environmental News Network, "Ocean" magazine and "GREEN Retailer." Martin holds a Master of Arts in English.

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