Question

Name and describe ten critical strategies for personal finance success.

Answer 1

Ten critical strategies for personal finance success are:

1. Devise a budget – Develop a comprehensive budget and this will enable one to live within one’s means and save enough for one’s long-term goals.
2. Create an emergency fund – An emergency fund should be created to ensure that money is set aside for unexpected expenses like medical bills, unexpected events like accidents, losing job etc.
3. Limit debt – It is a very important strategy and one should ensure that one’s debt exposure is bare minimum and is up to a level that can be easily serviced or paid by them.
4. Judicious use of credit cards – Credit cards usage leads to debt pileup. One should keep a keen eye on one’s credit utilization rate etc. and ensure that credit card use is not reckless.
5. Monitoring of credit score – Credit score should be good and for this one should keep a watch on one’s use of credit. Factors affecting credit score are factors like how long you've had credit, your payment history, and your credit-to-debt ratio.
6. Take family into consideration – To do this make a will in a timely manner. This will help in protecting your assets. A power of attorney is also useful for this purpose.
7. Pay off student loans – Student loans carry high amount of interest and so principal reduction with regards to student loans is extremely important.
8. Saving for retirement – A person’s earning capacity and capability declines after retirement and so one must carefully plan and save for retirement so that a large corpus is build and expenses can easily be met even after no longer being employed or no longer actively earning.
9. Take optimum advantage of tax breaks – One can maximize one’s tax savings by efficiently making use of tax breaks and savings from this can be utilized to pay debts or for meeting one’s needs and requirements.
10. Make use of a professional if required – Personal financial success cannot always be achieved by oneself. A person may need to utilize the services of qualified professionals like CPAs, CFAs, advisors etc.