1. Spend less than you make – it sounds almost too simple, but not enough of us do it! Make sure you are not making any unnecessary purchases and building up any debt.
2. Make sure you have an emergency fund – especially now with unemployment rising, it is good to have 3-6 months of cash available. Your emergency fund should be able to cover necessary living expenses such as mortgage, utilities, food etc. The rule of thumb is 3 months worth of expenses if you have two income earners and 6 months if there is only one income earner. The purpose of an emergency fund is to help you through those difficult times, such as illness or job loss, without having to dip into retirement accounts or taking out loans. An emergency fund should be in an easily accessible account but one that you only dip into in case of emergencies!
3. Put together a budget – now is a great time to track your expenses. Look back over the last few months. What are your necessary expenses vs. your discretionary expenses? Seeing where your money is going helps us to be more disciplined in our spending! Make sure you are paying yourself first. This is money for your emergency fund and your retirement fund.
4. Use credit cards wisely – pay them off every month! Use them to take advantage of the cash back, not to use them as a loan. You want to make sure you aren’t carrying a balance from month to month, and are paying down any balances you may have.
5. Review and rebalance your portfolio – with the changes in the market in the last year, most portfolios are no longer in proper balance. This should be done every year or so. Having a balanced portfolio helps to minimize risk and maximize return. Your balance will depend on your age, risk tolerance, financial situation, number of years until retirement, etc.
6. Pay yourself first – Make sure to be putting aside money now for your future. The earlier you start the more time the money has to grow.
Remember that there are no scholarships or loans for retirement!