There will be a lot of financial decisions you need to make on a daily basis. From the moment you wake up to the time you hit the bed, you would have made a lot of them whether you like it or not. Some more directly than others. WIth this in mind, it is best to start looking for ways to make these daily decisions impact your future on a positive note.
To understand this better, you need to know that your actions throughout the day are dictated by goals you have. The reason you wake up early each day is to get to work on time and beat the traffic on the road. Why do you wake up the kids early? So they can clean up and prepare and go to school. In the same manner as the reason why you are saving money is to prepare for your own future.
These are decisions you make to help you achieve a certain goal in the near or immediate future. The same concept goes for your financial decisions. There are decisions that you can do now that can help you in the immediate future such as putting away s few dollars for that coffee in the morning. The difference is how far off the benefit will be.
It can be to benefit from it at the end of the day, the week, the month, or even years from now. There is no doubt that the further out the benefit is, the harder it would be to make a decision. To help you with that, here are a few of the money decisions you can make today which will positively affect your financial future.
Commit to a budget now
One of the most important decisions you can make is committing to a budget. As you put together your budget, you have to discipline yourself in following the same. This is one of the most common problems consumers have – making a budget but failing to stick by them. Their budget simply stays at home, in their smartphones, or in their computers. Using a budget is one of the financial decisions that can help you achieve your long-term goals.
Also, doing it early enough in life can help you anticipate potential budgeting mistakes. On top of this, is that if you do make a mistake, you have the luxury of time. You can still make some adjustments to prevent the same thing from happening again. The important thing is to have a household budget and commit to it.
Consciously improve your credit score
The reason why you might want to work on your credit score as early as possible is that it takes time to effect changes onto it. One thing you need to understand as well is that it is not just a matter of improving your score, you also need to maintain it. At the moment, the national credit score average is at 700 according to FICO. This is the highest one yet.
To do this, you need to start with your payments. You have to make sure that you are not sending in late payments. It is also a good idea to stay on top of your credit report and monitor them regularly. This is to either prevent or catch identity theft early on. Especially with all the data breaches happening all over affecting establishments and even credit reporting bureaus.
Be proactive with debt payments
Being more active in managing your debt payments is one of the best financial decisions you can ever make. It helps you with a lot of things more than simply being sure that you do not miss a payment. For one, you do not pay more than what you have to over to your lenders because of fees and other miscellaneous charges.
It will also help you improve and maintain a high credit score. Having one will definitely help you get access to better options in the future in terms of better rates for loans. If you are currently trying to juggle multiple debt payments all at once, it might be a good idea to explore debt consolidation as a repayment strategy.
As the name is already a giveaway, what it does is it essentially combines most, if not all your debt obligations under one account. You are then left with one payment amount, one interest rate, and more importantly, one due date every month. It lowers down your financial stress and to a certain extent, your monthly payments. Those are really helpful when you are trying to make financial improvements.
Build up your emergency fund is one of the best financial decisions
CNBC shared in a recent piece that the ideal emergency fund should be based on your personal situation. This means that the amount can be based on as little as 3 months to even 2 year’s worth of your expenses. If you have a pretty strong investment portfolio, a stable career, even a profitable side business, you might be able to make do with a few month’s worth of reserve funds. However, if you have an irregular pay, it is better to have a bigger emergency fund.
Regardless of the amount you decide to save up, the important thing is to start putting away money for emergencies. More than it helps you manage potential stress arising from the unknown situations in the future, it can also help you keep debt at bay. This is because when you are faced with a financial emergency and you do not have any savings, you tend to take up debt as a way to address that. You either charge every single need on your card or take out a high-interest loan to get by. Having an emergency fund will either limit the amount you have to take out or cover it entirely.
Start saving now
Making present financial decisions has to have a sense of urgency to have an effect on your future goals. For example, just because retirement is still decades away means you can put off planning for it for a few more years. This is a common scenario especially with the younger generation who does not see retirement in the immediate future.
However, the sooner you start saving for it, the more you will have at the time you need it. You might even be able to retire early and pursue some dreams and passion you might have. In all these, the important thing is to simply start now. Start saving now for your retirement, for your emergency fund, or even for that business you want to put up in the future. The sooner you get started, the faster you can achieve them.
Choose a shorter repayment time frame on your mortgage
This is one of the financial decisions that you really have to discuss with your partner because as much as it can help you, it can put a strain on your budget. There are a lot of ways to control your mortgage payment and this is definitely one of them. The shorter your repayment on the house, the faster you get out of debt and be able to allocate that money somewhere else. However, there is a catch.
The shorter the repayment, the higher your monthly mortgage payment can be. This is because you are basically condensing the payments in a shorter period. Your interest rate could be lower but you will be paying more on the principal amount each month. So this is the trade-off that you need to keep in mind when choosing to shorten your mortgage repayment.
Plan for the kids early
Early planning for the children usually refers to a college fund. However, the most common problem parents face today is deciding where to focus on their retirement fund or save for their children’s college education. In a perfect world, it would be easy to save up for both but for most families, it is a toss-up between the two.
A lot of experts and other people are making a valid point when it comes to this decision. The fact that your children can borrow for their college fund and you can not do the same for your retirement needs makes it very clear. You should prioritize on your retirement fund. It could even come out less expensive for your children to take out student loans and pay for them rather than financially support you in old age.
That being said, you should not abandon your children in facing the student loan problems all by themselves. It is still possible to save up for it but the amount would depend on how much you can set aside without compromising your own retirement. The important thing is you start planning for it early. You can also help them look for free money for college. It can be sponsorships and grants they can apply to.
There are just some of the financial decisions you need to make now in order to positively affect your future finances.