No matter if you’re starting to manage money for the first time or you have decades of experience, improving your personal finances is an ongoing process. Maybe you’re earning more or less, have a new family situation, or have completely different financial goals than you did last year.
By taking the time to review a few key decisions and tasks, you’ll find easy opportunities to improve your financial life. Yes, it takes a little time. But I promise that the rewards—like having peace of mind, saving more money, and building wealth—far outweigh the effort.
Here are four small steps that yield big improvements for your personal finances.
Review how much you're saving for retirement
Most people aren’t saving nearly enough for retirement. To make sure you can live comfortably after leaving the workforce, invest at least 10 percent to 15 percent of your pre-tax income for your golden years.
If your employer offers a retirement plan, such as a 401(k) or a 403(b), make it the first place you set aside money for the future. Traditional retirement plans give you a nice tax break and relatively high annual contribution limits.
If you're participating in a retirement plan, consider increasing your contribution a percentage point or two each year until you hit the annual allowable limit. And if you receive employer matching funds, always contribute enough to max out the match so you don’t miss any free money.
Don’t make the mistake of thinking that you’re too young to plan for retirement, or that you’ll make up the difference when you earn more later on. Young people have a lot to gain by saving early because compounding allows your account to mushroom over time. Getting a head start means you can amass a fortune on far less than someone who starts later in life. In other words, postponing retirement contributions is expensive.
Consider the insurance coverage you really need
To protect your assets, make sure you have enough of the right kinds of insurance. Check online to get free quotes from competing companies as prices can vary considerably over time and from carrier to carrier. Review your coverage types and amounts every year to make sure you aren’t over – or under – insured for the following types of insurance:
Know what legal documents you should have
There are a few critical legal documents that everyone should have in order to make your wishes clearly known. Once created, update the following each year.
Review and improve your credit
Your credit score plays a huge role in your personal finances because it affects what you pay for interest, insurance, and various utility deposits. Unfortunately, many of us don’t uncover problems in our credit reports until it’s too late. Every year, give your credit a check-up by viewing or downloading your credit report. And by the way, checking your own credit never hurts your scores in any way.
Look carefully for accounts you don't recognize, which could indicate that you’ve become a victim of identity theft. If you see incorrect account details or personal information, submit an online request to get them corrected right away. Errors on your credit file could be dragging down your credit scores, and costing you money, without you knowing it.
If you’ve been putting off important money management decisions and tasks, consider taking off a day from work to tackle your financial to-do list.
Additional steps you can take to improve our finances
Start with the above four steps, but consider other ways to improve your personal finances:
Even small steps taken to improve your financial life will repay you many times over, not just for now, but for decades to come.
Laura Adams is a personal finance expert and award-winning author of multiple books, including Money Girl's Smart Moves to Grow Rich. She’s been the host of Money Girl, the top-rated weekly podcast, since 2008.
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