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Building a Financial Strategy

A financial strategy is simply a plan for how you are going to handle your finances. It does not have to be overly complicated, but it should cover the basics and help you avoid major financial mistakes to put you on your way to a secure financial future.

 

Your financial situation will change over time, so you will need to adapt your financial strategy to account for those changes. You will probably earn more money, your expenses will probably increase and your short-term and long-term goals will change as you experience various life events. The following are some ideas to start with to help you take control of your financial future.

 

Develop a household budget.

 

Get rid of high interest rate credit card debt.

 

Develop a financial reserve.

 

Save for retirement.

Your retirement lifestyle is dependent on decisions you make before retiring. Take full advantage of your employer’s retirement plan. Contribute as much as you can, and try to get any available employer "match." Then consider contributions to a Traditional or Roth IRA.
Being prepared (with 3 to 6 month’s living expenses) can help relieve financial anxiety. Consider an automatic savings plan where a specific amount is being deposited into a savings account from each paycheck.
If you are carrying over balances each month and paying interest, cut down on your card use, pay more than the required monthly minimum and eliminate this expense. You may also want to consider a different credit card that offers a lower rate or a line of credit.
This is often one of the most dreaded parts to being financially responsible. Determining how you spend your money will probably lead to identifying how to reduce some expenses. You may want to use some common financial management software (Quicken, Mint.com, Excel or Microsoft Money) to help. These relatively inexpensive programs will also help organize your finances and may save you time.