The following is a guest post by DebtKid, who blogs about his journey out of debt. He runs a small software development company in Seattle and just launched a new online coupons section on his blog.
If managing your money qualified as a sporting event, the rules and players have definitely changed.
To ensure your financial security in the future you must adjust to these changes. Before you retire your old play book, however you should have new strategies in place to manage your personal finances in the current economic times. Here are a few of the new “rules” that should be added to your arsenal.
20% Down
Owning your own home has been considered part of the American Dream for many years. In recent years more and more people have overextended themselves and played Russian roulette with their mortgage terms, turning their dream into a nightmare. In the current economic climate, it is advisable to carefully consider your finances and your short and long term goals before purchasing a home. Ask yourself how long you will intend on living there and what type of lifestyle you can maintain while paying your mortgage.
Understand lenders are not as free with their money as they have been in previous years meaning you will have to have very good credit and put down at least 20% to reasonably expect financing approval at a good rate.
Saving is Sexy
This isn’t really a new rule, just one that have been forgotten by many Americans. It seems that trend has changed and Americans are saving more money now then we have in decades however it is important to stress the need to continue on this path. The need to have cash available for emergencies, unexpected expenses and large purchases is going to become more necessary as the ability to qualify and secure credit declines.
Rebalancing isn’t optional
In addition to bulking up your regular savings, it is also important to pay attention to your investments. In spite of losing thousands of dollars over several months, may workers continue to contribute to their retirement plans. Not only are they contributing, few are making any changes in their asset allocation which may be detrimental in the long run.
Rebalancing your portfolio is necessary to ensure you don’t get into a rut that may result in steadily losing money or limiting your ability to grow your money. Pay attention to what is happening with your portfolio, as you age and the market changes, doing the same old thing may not be your best strategy.
Avoid debt like the plague
Conservative living is back and avoiding debt is the new goal for many people. By far the best albeit hardest lesson to learn is the true cost of indebtedness. There is simply no way around the fact that overextending yourself financially will limit your ability to enjoy life.
The excessive spending that has been common for the past several decades has played an important role in the financial turmoil many people find themselves facing today. As a result more people are adopting a more conservative approach to spending money and avoiding debt which will undoubtedly lead to a better quality of live.
In reality these new rules are not in fact new. This same advice has worked for our ancestors and will likely work for future generations as well. The key is changing your old attitude and embracing these tried and true methods of successful money management.
What are your new rules of money?
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Securities offered through LPL Financial, Member FINRA/SIPC
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