5 Quick Money Lessons to Learn Now

August 6, 2008 By Tisha (Kulak) Tolar

Many times when it comes to money, there are a few sayings that stick with you throughout your lifetime. Famous clichés such as a penny saved is a penny earned and similar saying that Grandma taught you certainly weren’t far off the mark. As more and more people struggle with debt, there are some more current financial proverbs you should keep in mind.

Here is a list of 5 money lessons to remember about your personal finances.

1. Automobiles

Buy a used automobile and plan to drive it for ten years to save yourself thousands of dollars, compared to what you would spend buying new. If you must buy new, make sure you are prepared to put down at least 20% down on the vehicle you want and only agree to a monthly payment that is less than 10% of your income. Never finance your new car for longer than four years in order to keep your spending under control.

2. Student Loans

Students may not always know what they will be after graduation but many of them will at least have an idea of what field they would like to enter once out of school. A good rule of thumb for student loan borrowing is to borrow only around the amount you can expect to earn during your first year of work. Planning for college should include planning to prevent debt. Lenders will be happy to let you borrow a lot of money but you need to see the reality of how much and how long it will take to pay back a student loan.

3. Home Mortgages

If you plan to buy a home, you need to figure out if you can afford to purchase the home at a 30 year fixed interest rate. If you can not, you simply can not afford the house. Especially now, in light of the multitude of foreclosures around the country, it is much more financial sound to use the 30 year fixed term than to deal with alternative types of mortgages such as interest-only loans.

4. Emergency Funds

Your ideal number for an emergency fund should equal about three month’s worth of your total living expenses. This emergency fund money can be used in the event of a lost job or other crisis. Until you are able to sock away that amount of cash to have on hand, you should keep room on a credit card or other line of credit in the event something unexpected should happen until you are able to save up the amount of money equal to your three month’s income.

5. Positioning Your Money

Everyone always wants to know how to divide their financial priorities. It seems the order of importance is retirement funds, paying off credit cards, followed by emergency savings fund. Planning for your future should be your top financial priority and the earlier you begin saving the better off you will be. Repaying your credit card debt should be the second most important priority, especially when interest rates are so high and your debt is affecting the rest of your finances. Lastly, your emergency fund should continue to grow in the event something happens without warning, such as health problems, job loss, or even home repairs.

Serious debt can be overwhelming, that’s why you need to seek professional debt advice to get yourself back on your feet as soon as possible. There are various debt solutions available, like an IVA, debt consolidation, bankruptcy or debt management. Get debt help now to find out which one is right for you and start getting out of debt now!

Posted in automobiles, autos, banking, budgeting, cars, children, college, credit cards, debt, emergencies, financial plans, lifestyle, personal finance, saving money

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