10 Important Financial Tips: (Path to Financial Freedom)

*Guard Your Credit

-Credit is one of those funny necessities in life. You always hear "Credit will get you in trouble!" or "Don't fool with credit cards". BUT, here's the thing. You essentially NEED credit for all the important transactions in life. You need credit for large purchases such as buying a car or a house. Bank will only loan you money based on your credit history. If you don't have credit, they have nothing to go by. But if you have credit and have taken care of it, then it puts you in a completely different bracket and much more likely to get a loan to purchase these luxuries.

Steps to Good Credit: (1) When your young, it's a good idea to check around at your local banks, credit unions, etc. and establish a relationship with them. Look into getting a small personal loan of approximately $1000. You can put this money away in a savings account and just let it sit. Over the next 2-3 months, make regular payments into paying off the loan. You may have to pay just a little more out of your pocket with interest, but it looks outstanding on a credit report. Remember! If you don't have a loan history then you won't be able to get approved later on for cars, homes, etc. (2) Apply for a credit card and make some minimal charges on it such as gas, small consumer items and things of this nature. When you receive the payment in the mail, pay the entire thing off. This looks good to the credit companies and will also show up on your credit report. The credit companies will also raise your limit over time which looks better on a report.

Steps to Bad Credit: (1)  Defaulting on any payments such as a cell phone bill, any utility bills, doctors bills, etc. You get the drift. Don't ever back out of a contract involving money unless you cover the penalty costs, and don't ever choose to NOT pay a bill. It will catch up with you on your credit report. (2) While paying all of your debts, you need to make sure they're on time every month. Some companies penalize you for constantly being late on your payments. So the 2 magic rules to avoiding bad credit would be PAY YOUR DEBTS AND PAY THEM ON TIME!!

*Create Savings Account

-Creating a savings account early on is a really smart idea. You never know when there will be times when nothing seems to go right. Have you ever heard the expression "When it rains it pours"? Well it's true a lot of the time. There could be that unexpected car repair, or storm damage, or medical bills, etc. It's smart to take a portion of the money you are making on a weekly basis and put it into a savings account. Generally people put aside 10 percent per pay period towards their savings account. Example: If you are making 400 per week, you want to put back 40 into a savings account. This doesn't seem like a lot but it really does add up. You could even use that money towards Christmas gifts when November and December roll around!

TIP: When opening a savings account. Consider doing it in an Online Bank or Credit Union. For easily accessible money the credit union is going to be the better bet coming in at around 2% interest. However, if you can go a few days without money until its transferred from a savings account, an online bank's going rate on savings accounts taps in at around 5%. That's absolutely unbelievable this day in time. It takes an extra couple of days to transfer money to/from an online banks savings account. But look at the bright side, if it's easy for you to spend money, this will discourage it!  (Online Bank Recommendation: Emigrant Direct)

*Create a Budget

-Creating a budget is one of those things that can save us all a lot of headache! Wouldn't it be nice to know going into every month just how much money you had designated for everything? Breaking it down to a point where you have your mortgage, utilities, gas, groceries, etc. A lot of Americans mess up by not having a set budget. It's like going into a situation blind. You don't know if your spending too much until you run out of money. Although it may not seem like a big deal, I suggest everyone take a little time out of their day to make a budget and stick to it. It could make life a lot less stressful!

*Explore Residual Income Opportunities

-There is always room for people to make more residual income. The average American works 5 days a week and 8 hours a day. This leaves weekends open as well as nights. Excellent ways to make a little extra money are everywhere. A lot of people get into doing yard work, babysitting, to even selling on E-Bay. Whatever opportunities arise to make a little extra money, jump on it. Unexpected income could solve a lot of problems as well as help pad your nest for unexpected times.

Example: A friend of mine works after school each day and pulls in about 300 a week. That's right around $1200 a month, but with all the expenses that he has including rent, car note, and utilities he doesn't have too much left over for other things. He also mows a few yards on the weekends. A total of six yards he does every 2 weeks. The average amount he pulls in per yard is about 40 dollars. That is an extra 240 dollars per month that he can use for leisure or to put away for rough times. While $240 may not seem like a lot, if its nothing more than money he can put in his savings account, it really adds up. As a matter of fact its just shy of $3000 extra dollars a year. Now wouldn't that be nice?

*Save more than you spend

- Now this may seem a little silly when you first read it. It seems like the rule of thumb doesn't it? Well truth be told, the average American spends more than they save. This is possible because of credit.  Remember we went over how beneficial credit is, but it can also put you through the floor. When people obtain credit they tend to look at it as free money. There is NO SUCH THING as free money. All this does is create more expenses with a fat interest rate to put you between a rock and a hard place. It is essential to save more than your spending. The way I see things is don't spend what you don't have, and if it's not in your budge to pay for it, then put it off. It's not worth getting head over heels in debt to pay for something if it can wait. THIS IS NOT EASY TO DO! But it's the best route, trust me!

*Set Financial Goals

- Goals are something that everyone should have. It gives you a sense of knowing what direction your headed in. How great would it be to set a goal to buy a new car in the near future. You figure at the rate you can save, you can put a down payment on a new car within 6 months, and use the money you have been regularly putting back to make those payments each month on your new prized possession. Without setting goals, we are just stuck on auto pilot. We spend money on worthless consumer products and maybe just having a little more fun than we should be. Remember Everyone! Everything great takes some kind of sacrifice. That new car down payment isn't just going to fall into your hands. It may take a few months of cutting back on entertainment, movies, golf, etc. Set goals for yourself and run with them!

*Establish a Retirement Plan

- You would be completely amazed at how much interest you gain from starting some sort of retirement plan early on. It would take nothing more than a small monthly investment each month to pave your road towards being a millionaire. Check out some of the interest rates on these retirement plans. The catch is, you have to keep this money locked up in a retirement plan until your right around the age of 70. When you reach this age, the interest accrued is unbelievable. Even more so than that, it's tax free! There are major penalties for taking money out of your retirement account prematurely. But for someone saving for the future, to have a cozy retirement, this is without a doubt the way to go!

*Invest

- Investing is also a major part of building your way to financial freedom. Just think of all the different investment options there are out there. You have anything from stocks, bonds, annuities, mutual funds, money markets, CD's and the list goes on. These all pay out substantial amounts of interest with the exception of some stocks. Stocks are a riskier way to accrue wealth, but the more risk involved the greater your potential rewards. If you are looking for a cushion or a pad, then you may want to stay in the ballpark of CD's, money markets, mutual funds, etc. Contact your local financial advisor for more information on the different investments and great rates you can take advantage of through them. As far as investments go, STAY AWAY FROM THE BANK! They will give you next to nothing on interest and it's just not worth it. Go through a financial company.

*Goodbye Banks, Hello Credit Unions

- If its convenience you are looking for, a bank would probably be your best bet. They are all over the country or region and offer many locations for you to conveniently have access to your money. Although there is always a trade off, and here's what it is: A bank offers the LOWEST possible interest rates on your money when it comes to savings and checking accounts. More times than not, people are earning $0 dollars in interest on their checking accounts and maybe a .1% on their savings. Seems legitimate right? Since all these other banks do the same thing. WRONG! The banks are earning hundreds of thousands of dollars of interest on YOUR money. You may have $10,000 sitting in a checking account earning no money in interest, but you can bet the bank is taking every bit of that for themselves. The banks are apart of the Federal Reserve which in turn pays these banks an interest rate for the amount of money kept in the Federal Reserve. So basically, they are stealing the money that is rightfully yours. Banks have huge amounts of overhead with their nice lobbies and structures. You may also realize that banks overdraft fee's will throw you for a loop. About $32.00 on average per overdraft. Credit unions usually charge half of this and have almost no overhead. Credit Unions will also pay you a much higher interest rate on your money than banks. As far as banks go, GET OUT!

*Create a loan history

- As I said earlier in this list, establishing a loan history with a local community bank or credit union is a huge asset to you later on. It may take you 10 banks before someone approves you for a $1000 dollar loan, but it's worth it. You can take that money and put it in a savings account and pay that bill every month. When the loan is closed it goes straight to your credit report. This way whenever you go out to purchase a car or house they will pull your credit and see that you have taken out a loan in the past and successfully paid it off without ever defaulting on your loan. This is especially a good thing for younger adults to do. When you turn 18 and have some kind of job paying a decent amount, loan officers won't be so reluctant to loan you the money. This is a great way to boost your credit score! TAKE ADVANTAGE!!

More Financial Tips Coming Soon!!

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