1. Protect Your Assets:
Make sure that you have the basics of insurance which includes homeowners/renter’s (including flood insurance), auto, health, life, and umbrella. After you have followed the remaining steps below then look into adding long term care and disability insurance. It only takes one disaster to disable your financial situation so don’t skimp on the insurance.
2. Get Rid of Your Debt:
Before saving for anything else, college or retirement, get yourself out of debt. Once you are out of debt you can catch up fast on your other savings plans with all the extra money you will have left over. Start with the smallest amount you owe first and pay that off. Next take what you were paying on that bill and add it to the next smallest amount until all debts are paid. The last thing to pay off would be your mortgage and at this time you can start your other savings plans while paying extra on your mortgage. By paying off the smallest debt first it enables your momentum of seeing a payoff and you are more likely to keep paying them all off.
3. Save for Retirement:
After your debt is paid off, it isn’t time to start incurring more. After contributing the maximum to your employer’s 401K, look into an annuity for an extra retirement vehicle. Also, start a college savings plan for your children.
4. Don’t Pay to Much for Health Insurance:
If you find yourself paying outrageous amounts for your health insurance try purchasing a high-deductible emergency plan then use a health savings account to pay for all your regular yearly costs. In most cases this option can save a lot of money for a family that is basically healthy. Also, if you are low income you or your children may be eligible for your state sponsored health insurance plan. Sometimes even if both parents are working you may still fall into the low income bracket. In addition, shop around. Health insurance prices can vary dramatically from company to company.
5. Stick to This Plan and Share Your Spare:
This can be a given but these steps take a lifelong commitment that can be hard at times. You may fail. You might just buy that item in the window you don’t need instead of taking that money and paying off your debt, but if that happens just start over again. Once you find financial freedom and peace you will have a greater understanding and responsibility of your money and you will probably be finding yourself more inclined to reach out to others with your spare money instead of buying things you don’t need.