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Published on January 17, 2023 | LPL Financial
When was the last time you gave yourself a financial checkup? As the saying goes, there’s no time like the present. This is especially true when it comes to reviewing the current state of your finances and figuring out what you need to do to get – or stay – on track so you can pursue your financial goals. To do this requires you to take into account a variety of factors. Setting aside time to understand your financial condition and conduct an honest assessment of where you stand is a great way to get started. Before you jump right in, consider these seven steps that you can take to assist you in evaluating where you stand financially and to help you determine a reasonable course of action to plan for the future.
Do you know your net income? After all the benefits, social security, and taxes are deducted from your paycheck; you are left with your net income. This can be an eye-opener for some people. Say somebody gets hired at $60,000 per year. You will not be bringing $60,000 home. Hypothetically speaking, if you live in South Carolina, you pay federal income taxes, state income taxes, social security, and Medicare which amounts to over $14,200. That $60,000 just became a little more than $45,500.
DonÕt forget: you also have to consider how much you pay for health insurance, vision, dental, and possibly life insurance if you have it. Knowing your net income is important because you have to be aware of how much money you bring in (income source) and, conversely, how much is going out. There are monthly bills, food, gas, entertainment, childcare, and more.
The inflation rate has not been this high in nearly half a century. Interest rates are also rising. Because the cost of living is noticeably going up, there are a few things you can do to soften the burden on your wallet. Understanding your daily, weekly, and monthly spending habits and sticking to a budget may help you better manage your financial situation while you adjust to current inflation and interest rates.
According to a survey by The Penny Hoarder, over 55 percent of Americans do not use a budget to manage their income, and 56 percent of respondents said they didn’t know how much money they spent last month. iThat is a big difference. Here are a few tricks to help you manage your money and your spending habits:
Investing is a way of taking money that you have saved and potentially growing your wealth over time. It is essential to understand the value of careful and knowledgeable investing instead of keeping your cash locked up solely in bank accounts that typically generate minimal returns and is tempting to spend. The real benefit of investing is the preservation and growth of your wealth. There are a few ways that you can invest. Having a diversified portfolio, especially in an unpredictable market, is wise in case one segment of the market falls harder than other industries. A few ways to invest include:
There is always the possibility of an unexpected financial emergency, whether a medical bill, car issue, income loss, or other unforeseen challenges. Setting up an emergency fund is essential to prepare yourself for financial obstacles. The general rule of thumb is to keep enough money in your savings account to cover three to six months’ expenses.v
If you live an average life, it seems that accumulating some debt, whether a home mortgage, a car, or a personal loan, is just part of the equation. Some days it might seem like trying to climb Mount Everest in flip-flops, but there are techniques you can try that might help you gradually get ahead of the debt. These techniques include:
A solid credit score is essential in pursuing your financial goals. Many people do not regularly monitor their credit or even know what their current credit score is, but making regular payments on accounts you owe has the potential to impact it tremendously. If possible, you want to try and pay off any credit card or personal loan balances in full. Stay on top of it, even if you cannot pay in full at this moment in time.
Trying to manage your finances and complete everything involved on your own can potentially be overwhelming. The hassle of collecting and organizing your financial information can be a nightmare by itself. Having an experienced financial professional in your corner may help you navigate the complexities of financial planning and you can work together to mitigate mistakes that could cost you in the long term. Take the time to research and consult with a financial professional so you can start planning today for you and your family’s future.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.
Investing in mutual funds involves risk, including possible loss of principal. The funds value will fluctuate with market conditions and may not achieve its investment objective. Upon redemption, the value of fund shares may be worth more or less than their original cost.
Dividends payments are not guaranteed and may be reduced or eliminated at any time by the company. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Inflation is the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by LPL Financial Marketing Solutions.
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