Top 10 Personal Finance Tips

Everyone wants to know how to hold onto their hard-earned dollars. Unfortunately, most Americans aren’t very good at it. The United States has one of the lowest savings rates in the world. Meanwhile, American households carry some of the biggest debts, primarily on credit cards.

These 10 rules of personal finance are intended to help.

1. Pay yourself first. Whether it’s through your employer-sponsored 401(k), an individual retirement account, or passbook savings account, save at least 10 percent of your income. After all, you don’t work just to pay bills. It just feels that way a lot of the time.

2. Save three to six months worth of income for emergencies. Don’t touch it unless it’s really an emergency. Saving for a vacation or new wardrobe are not emergencies. You never know when you could lose your job, become disabled or sick, or have a major medical or family emergency.

3. Take advantage of your employer-sponsored 401(k) plan. Contribute at least as much as your employer will match, which is typically between 3 and 10 percent. Consult your human resources department at work for details on how that particular 401(k) plan works.

4. Pay off credit cards with the highest interest rate first. Obviously, there’s no sense in paying off a 12 percent card before a 15 percent card. Make minimum payments on the 12 percent card until the one with the 15 percent rate is paid off.

5. Come up with a budget and stick to it. You can use a computer program or just pen and paper. But do it. Figure out your income and expenses and what you have left over to spend as you wish.

6. If you have trouble determining where your money goes, particularly cash, then keep a spending journal. Document all expenditures for at least a two-week period. This will help you in coming up with a budget as well.

7. Don’t borrow from your 401(k) or retirement plans. This money, after all, is for your retirement. Plus, the tax implications and early withdrawal penalties are so hefty that you really are giving up a lot for a short-term cash infusion. You should have a separate savings account for your current needs.

8.Pay in cash when and as often as you can. It’s amazing how good that feels.

9.Shop around for the best credit card deals and banking programs. By shaving off a few percentage points on your credit card or avoiding bank fees, you can save hundreds of dollars a year.

Avoid peer pressure. Your friend might be able to afford five new pairs of leather boots, but that doesn’t mean you can. Who even knows if your friend can and who cares. Take care of yourself first and don’t try to keep up with the Joneses. There will always be people better off and worse off than you are.