Personal finances are not the strong suit of many consumers. This is largely because there isn’t much exposure to the topic unless it is a discipline studied in college or at another institution of higher learning. Unfortunately, not knowing some of the most basic principles of personal finance can cost consumers thousands in unnecessary payments each year. That is why the following list of three ways to improve personal finances today has been created. The easy to implement tips, in no particular order, are as follows:
- Pay Down Credit Card Debt
- Increase Retirement Contributions
- Automate Bills
Pay Down Credit Card Debt
Credit cards hold some of the highest interest rates in the financial sector. In fact, those who have large outstanding credit card debts may be only paying interest each month without ever touching the principal. So, if a consumer has any extra funds, be sure to divert them to paying off credit card debt. In the long run, this will end up saving the consumer thousands of dollars. Although credit cards are sometimes necessary, it is always the best practice to pay them off in full each month.
Increase Retirement Contributions
The biggest advantage young employees have in relation to retirement accounts is time. Time is the only tool which can be utilized to capitalize on compound interest. While it may require consumers to tighten their belts a bit in the short term, increasing a retirement contribution pays handsome dividends in the future. It is amazing how much of a difference an increase of just a few percentage points to tax advantaged retirement accounts can make over the course of a full career.
One of the quickest ways to incur fees or be required to pay penalties is to not pay bills on time. Many businesses make it very clear that a flat fee will be added to a regularly monthly bill if payment is not made in a timely manner. To avoid ever forgetting to pay a bill again, automatic bill payments should be set up. Almost every bank is able to process these types of payments which automatically withdrawals funds from an account on a predetermined day of the month. This way, consumers will never end up paying more than necessary for recurring bills.