I’m In A Good Position Financially, What Can I Do To Take My Personal Finances To The Next Level?
I recently had a conversation with a friend who mentioned they are in a pretty good financial situation. He had no debt, had just purchased his first house, and participated in a 401(k) plan at work. His question was what else could he do to improve his already solid personal finances?
Most of the personal finance information is targeted towards one of two groups:
- People who are a disaster financially: No assets, increasing high interest debt, and an income that becomes less and less sufficient. The advice for this group is typically to cut spending, pay down debt, and work harder.
- People who have more money than they know what to do with. These people are targeted because, well, they have money. Financial planners and advisers want them as clients. The typical advice is to diversify, diversify, diversify.
What about a normal 20-something that actually is in a good place financially like I described in the first paragraph?
There are steps to take to improve the already strong financial position that my friend is in. Let’s look at how we can take a good financial position and make it an excellent financial position.
- Open an investment account and begin to learn how to invest money and learn the stock market. If you are maxing out your 401(k) and still have money you want to put away, consider opening a Roth IRA. I would definitely recommend using Zecco.com for your brokerage account. You’ll have no trading commissions and great service. Why are you currently paying for trading commissions?
- Open a high interest checking and savings account to ensure maximum return on all money. Don’t be one of those people that has idle money. All of your money should be working for you, even your checking account.
- Have an iron-clad identity. Identity theft is expensive and can take an enormous amount of time to get your identity completely back. Who can afford the cost and the time taken from you? I know I can’t thats why I use LifeLock. to ensure I don’t get hit by the surprise of a phone call telling me I’ve had my identity taken. It was an absolute nightmare for a buddy of mine who experienced identify theft; everything was fixable, but the time it took to deal with it was insane.
- Sell your clutter. De-cluttering your house and life can make you feel better and put some cash in your pocket at the same time. Put some old furniture or other items for sale on craigslist, then throw that money you earn into your Roth IRA. Everytime I sell something on craigslist, I’m amazed again and again how easy it is.
- Shop around for a better auto insurance rate. When is the last time you have done a comparison on what you pay for auto insurance? You might be paying more than you have to. I recently did a free quote comparison at Kanetix and was able to find a better rate and save a few hundred dollars a year. Not bad, and you can find out in a matter of minutes if you’re over-paying.
- Earn more on your spending through a high rewards credit card. I use a Starwood Preferred Guest American Express Card to earn hotel points at my favorite properties. I love to travel and I love to stay at Westin and W properties, so everytime I spend money, I am earning points towards free stays. Figure out what you want to earn, then find the right card to earn it. It’s worthwhile to note that I never carry a balance; instead, I think of my AMEX as a debit card.
Additionally, the following items apply if you have a spouse and/or family. If you are single and nobody else depends on you, then the following probably do not apply. Although, you may still have an interest in researching and learning about the below listed products.
- Protect your family with a will. I’m recently married and am expecting my first child. It’s weird when you find yourself thinking about a will for the first time. Being young is not an excuse to not get a will. Make sure your family is protected should something happen to you. I used LegalZoom to create a will. It was extremely easy and inexpensive. I would definitely recommend them.
- Get Term Life Insurance. As a 20-something, you can qualify for some fantastic rates. I was able to get more coverage for more years than I thought for a very cheap price. Now that I’m married, this was a necessary move. If you’re young and healthy, get some cheap term insurance now and as your income rises, get additional policies for more coverage.
If I’ve left out any action to take to take your personal finances and wealth creation to the next level, feel free to add to the list by adding your comments!