4 Steps to Better Money Management
By: Source: AARP Bulletin Today Date Posted: 2003-08-27 09:15:44
Ric Edelman suggests four steps to better money management:
- • Step 1. If you're still working, join your company retirement plan. "I don't care what else is going on in your life, that's first," he says. Put the maximum allowed into your employer's 401(k) plan.
- • Step 2. Eliminate debt, especially on credit cards. (Exceptions: mortgages and loans with interest rates of only 5 or 6 percent.) Do whatever it takes—empty your bank account, sell your silverware, cancel your cable TV—to reduce debt.
- • Step 3. Build cash reserves. Things happen—the car breaks down, you lose your job, an income check is delayed. So you need cash or cash equivalents that are safe and accessible. Stash your cash in checking or savings accounts, money market funds, short-term certificates of deposit, Treasury bills or your mattress.
How much you put away depends on your circumstances and your monthly expenses (not on your income). Generally, employed people need enough cash to cover three to six months of expenses, although a single parent who gets sales commissions instead of regular pay may need to cover one year. A military retiree with benefits plus investment income may need cash reserves for only a month or two. - • Step 4. Once you've completed steps 1, 2 and 3, start investing.
For more on money management, go online to www.ricedelman.com.
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