5 Financial Moves to Try This Month

As the year comes to a close it is not too late to start getting your finances in order so that you can start off 2014 in a good place. In order to do this here are five financial moves to give you a kick-start into the New Year.

Purchase a Smaller Home 

During the housing bubble of 2004 and 2005 it was not uncommon to hear people who purchased a house way beyond their means because their real estate agent convinced them that their income allowed them to purchase a more expensive home. At that time many people went ahead and purchased a home at the highest bracket that they were able to afford, while only a small percentage held back and decided to purchase a home that was more within their means. If you are looking to purchase a home in the new year then a very savvy financial move would be to purchase a smaller less expensive home even if you think you can afford a more expensive one.

Save the Right Way for Retirement

It is a good financial move to not tie up too much of your savings in a tax-free retirement account such as a 401(k). This is because when a financial emergency hits, you will be able to deal with it if you are more liquid then a 401(k) allows. Tying up too much money in a savings account that is restrictive such as a college or retirement savings accounts means that you will not have as much flexibility to invest in current important things such as paying bills.

Do Not Make Stocks Your Main Financial Strategy

The most financially successful people do not use the market as a way to gain their income and success; instead they use it as a tool. This means that while investing in a stock or two may be a sound part of a much larger financial strategy, you should not depend on it.

Focus on Perpetual Income Streams

You should be focused on how to create and build up your perpetual income stream or streams. This type of income should provide you with a steady and consistent pay out of cash over time. For example a doctor may decide to purchase a medical office that will generate him or her rent or an author may make an income off of a book. You should think of perpetual income streams as the holy grail of your finances. It is highly recommended that you avoid the very traditional investments in order to generate more income. One example of a traditional investment is annuities, which are extremely expensive and once they are purchased you are not able to change your mind.

Figure Out Your Cash Flow 

When you are attempting to get on top of your finances, you may be tempted to begin tracking and analyzing all of your expenses from your soy latte at Starbucks to the gas you put in your car. However, many financial analysts believe that doing these calculations are extremely meaningless. Instead of wasting your time you should instead focus on the costs that cannot be changed by cutting back. These include debt payments and mortgages. As long as you are generating enough income to cover these types of long term expenses that you can’t easily cut back on, then you will feel more secure in your finances. On top of this, it is recommended that if you are spending any amount of money that isn’t a necessity and isn’t making you happy, you should work to eliminate it.

Finances - 4 Dec, 2013 - No Comments