Making Smart Financial Decisions

By Author: David Smith
Total Articles: 4762
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These days it may feel tough to make the right personal finance decisions, especially with so many companies competing to get a cut of your money, often at your expense. What can you do to be sure you're making the right choices regarding savings, investment, and retirement? Here are a few principles that will help point you in the right direction:

Stay Out Of Debt

The number one rule for financial success is to stay out of debt. Don't spend money you don't have, and if you do have debt, pay if off as quickly as possible. There are some exceptions to this, such as mortgage debt. Mortgage debt isn't necessarily bad, as it's backed up by the value of your home, which should theoretically increase over time. But most debt, especially high interest credit card debt, will cause you to lose money every day rather than making returns on your investments.

Maintain Quality Insurance

Quality health, home, and auto insurance will help to keep you out of debt in case an unfortunate event occurs. Without insurance, the costs of a medical emergency for example can bankrupt even a wealthy family. Having insurance ...
... that covers all your bases will protect you from catastrophic loss and give you peace of mind. Maintaining solid coverage is a step you should take even before attempting to get completely out of debt if you're already in it.

Maximize Your Income and Savings

Don't feel stuck at your current income level. There ARE things you can do to increase your income, from educating yourself and moving up in your current work environment, to asking for a raise or changing jobs completely. Keep trying to earn more, and increase your savings when you do. Remember that savings are different from investments. You should keep a predetermined amount of emergency money in savings in case you lose your job or any unfortunate even occurs. This is money you don't touch for anything other than a disaster.

Invest Your Money for Big Future Gains

Once you've got no debt, quality insurance, and savings for a rainy day, it's time to invest your money. Investing your money over a period of decades can make you rich. The key is to have your earrings compound, maximizing your gains and minimizing your losses. Attempts to play the stock market are highly likely to fail. The best way to invest your money is in a diversified portfolio to decrease your risk. You'll want some of your money at very little risk, a smaller portion at a higher risk level, and some in between. Invest in a combination of fixed income assets such as CDs and treasuries, commodities, real estate funds, index funds, US, and foreign markets. If you choose to use an investment advisor to help you, make sure to shop around and get the lowest fees possible. Fees that seem small on the front end can add up fast and dramatically decrease your future earnings. You can learn much more about smart investing at FinancialCalculator.org.

By following the basic principles above you'll be on your way to stress free living and financial success!
About Author:
David Smith writes for Financial Calculator, where you'll find free online calculators and great financial advice, including on the Personal Finance Blog. Stop by for information on mortgages, investing, retirement, and much more.