We are all going to retire at some point in our lives. There are some of us who may retire younger than others, but we all do well to think about our retirement and to begin to make wise choices for our money while we are in the prime of our working years. The financial decisions that you make now will have a huge impact on the life that you will lead in the future. In the following article, we will explore 3 financial rules that you must know before you retire.
#1 Avoid Debt or Pay It Off
Debt is anything that you owe. Instead of going into debt to buy a car, save up to get a car, and then buy one that is affordable. Instead of going into debt for college, work while you are in high school to save as much as you can and apply for as many scholarships as possible. If you have bad debt, things can be difficult, but you still want to do all that you can to get out of it. Of course, difficult situations can occur to anyone at any time. If you have bad credit and you find yourself faced with an unexpected emergency expense, then a cash advance online for bad credit could be an option for you. This should only be looked at as a last resort, but can be a good option if you do not have the savings built up to get you out of a short-term financial pinch.
#2 Create an Emergency Fund
Murphy Law indicates that if there is something that can go wrong, it probably will. Since that is the case, you want to do all that you can to save up money in case of an emergency. You generally will need enough money to cover your family’s expenses for 3-6 months. Even if it means that you are going to have to work longer and more hours, it is worth it for a few months in order to get a good emergency fund in place for your family.
#3 Start Investing for Retirement
Once you are out of debt and you have saved up enough money for your emergency fund, you do well to start saving 15% of your income for retirement. There are various investment vehicles that you can use in order to save for retirement. Your company may offer you a 401k plan, or you can open up an IRA at your local bank. You can also invest on your own through a brokerage company, or you can invest with a financial advisor. Whatever it is that you decide to do, you want to invest in order to have enough money for your retirement. In order to know how much money that you are going to need in your retirement, you do well to apply the Multiply By 25 Rule. With this rule, you multiply your current income by 25 in order to know how much money you will need when you retire.
Get Your Finances Right Now
If you are working, then you are in a position to plan for your retirement. By becoming financially literate and making wise financial decisions, you can be assured that you will be able to retire with dignity.