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How Proper Finance Planning Can Avoid Debts?

By wimutualfunds.com | March 27, 2016 | 0 Comment

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If you have a tendency to fall into the trap of debts more often, then you are handling your finances in the wrong manner. You can avoid debts if you have a proper financial plan. Without which, you won’t be able to handle your finances. If you are careful with the following things, you will find it easy to stay away from debts.

Stay away from debt

Yes, this is really important. If you have a policy to don’t fall into the trap of debt, you can handle this in a much better manner. I am not talking about good debt here. I am strictly referring to bad debt here. Good debt is the kind of debt that will help you to save or make money. For example, money borrowed for starting a business or buying a new house can be considered as good debts. As for bad debt, you definitely want to avoid them. Credit card debt is one such example. Also, debts for buying things that will likely to decrease value are also considered bad debt. The internet is a major source for information and you can look up for more information.

Always save 10% of your income

Yes, it is important to save a percentage of your income for future use. You can follow the 60/20/20 rule. The 60% of the savings should go to your retirement plan. And the next 20% should be dedicated for emergency expenses. You shouldn’t touch this unless there is an emergency. And the remaining 20% should be saved for buying things you want to buy – for instance car, boat, house etc. Saving for your child’s college education is an important saving.

Don’t delay mortgage

In case if you want to buy a new house, you have to pay off the mortgage as much as you can. There are so many investment advisers who will tell you to not do this. But you shouldn’t listen to them. In life, most of the decisions are financial decisions. Moreover, financial decisions are driven by emotion in most cases. Owning a home free and clear can make you feel relieved and happy. Therefore, you should definitely consider paying the full amount as soon as possible for your own piece of mind.

Open a Roth IRA account

If you are eligible to do this, you should definitely open a Roth IRA account. The best thing about such an account is that it is tax free. When you take it out at retirement, you will enjoy tax free amount. Anyone who is paying taxes for retirement will tell you how difficult this is. Therefore, you should seriously consider this one.

Learn to invest

Yes, investment is a really important thing. If you don’t know how to invest your money, you should learn how doing it. It doesn’t matter whether you are employed, self-employed or a business owner – you need to learn the art of investment. Without proper investment, you will find it hard to handle money. If you want financial freedom, you should learn the ropes of proper investment. There are so many great investment opportunities you can think of. You can also search on the internet for more info.

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