6 Steps to Fix Ailing Finances
Are you feeling sick about your ailing finances? People who adopt fiscally responsible behaviors feel less stressed and more optimistic about the future. If you're ready to improve your financial health, follow these six simple steps to help you get in shape for a healthier financial life:
1. Save, save, save. If you don't participate in the Thrift Savings Plan, now may be the time to start. And if you or your spouse has access to an employer-sponsored retirement plan, make sure to contribute at least enough to earn an employer match if one is offered. Take a look at your emergency savings, too.
This is the cash you keep on hand for unexpected expenses -- car repair, plumbing emergencies, PCS or something similar. Set aside a small percentage of each paycheck to boost this account -- especially if you've dipped into it in the recent past. Your goal should be to accumulate up to six months' expenses in this account.
2. Cut credit card debt. Credit card debt may seem like a burden that will never completely go away, but many members of the armed forces are successfully tackling their balances. Military families with household incomes of at least $50,000, pay more towards their short-term debt than the rank and file of middle-class Americans, according to the First Command Financial Behaviors Index..
During the first quarter of 2010, average payments on short-term debt totaled $1,032 compared to $969 for the general population.
Need help? Start by asking your credit card company. They may offer a reduced interest rate to customers who routinely pay on time. You should also look into transferring high-interest rate balances to a lower-interest card. Don't just make the minimum payment each month. Make sure you pay at least the new purchases plus interest, and more -- as much as you can -- and make sure your payments arrive on time. Your credit card company could charge high fees for being even a day or two late.
3. Prepare for a Permanent Change of Station. Approximately one-third of active-duty servicemembers are moved in a given year, according to the Department of Defense. Although you may benefit from a number of PCS entitlements, you may incur a number of unexpected -- and non-reimbursable --expenses as well. So it pays to do your homework before your PCS. Take advantage of resources, which may be available through the transportation office, finance office, and family center at your installation. Find out which benefits you're entitled to, and determine how much of your expenses they'll cover. You may be entitled to:
- Advance Basic Pay -- an interest-free loan of up to three months of basic pay.
- Advance Basic Allowance, Housing-- an advance on monthly pay for off-base rental housing.
- Dislocation Allowance -- helps pay for moving expenses.
- Monetary Allowance in Lieu of Transportation -- pays for mileage when you drive to your new station.
- Per Diem Allowance -- helps pay for meals and lodging while you travel.
- Temporary Lodging Expense -- helps pay for meals and lodging when temporary housing is required.
- The better your idea of your expenses, and the better your knowledge of what's covered, the better you'll be able to establish a budget for your move. Be sure to figure in costs for food and household items you'll need to purchase when you arrive, as well as miscellaneous expenses such as deposits for utilities. Remember that any advance pay you take needs to be paid back.
4. Track spending. Keeping tabs on every dollar you make and spend is essential for establishing better financial health. Whether you use free online software, choose to purchase a program or even use a notebook, tracking your spending is the only way to know exactly where your money goes.
5. Trim miscellaneous expenses. In addition to mortgage or rent, insurance, groceries and utilities, you've probably got expenses that don't really fit nicely into one group. These miscellaneous expenses -- eating out, gifts, clothes and entertainment -- can really add up. Make a commitment to cut 10, 20 or even 30 percent from your miscellaneous category and you'll be on your way toward big savings.
6. Put goals on paper. Consider your plans for the near future and also long-term. Whether you'd like to go back to school, start a business, purchase a home or simply boost your emergency savings, it's worth it to write your goals down. Having a record of your goals can make them more obtainable.
Just as we count on physicians to analyze our physical health and provide treatment when needed, we must also face our finances and take steps to improve our fiscal health.
For more information about curing your ailing finances, visit Military.com's Banking and Savings channel.