Ask the Experts: June 2018
Talking about money is important. Unfortunately, a lot of people don’t feel comfortable discussing finances, budgets, and other financial plans. Unfortunately, since people don’t like talking about money, it’s easy to find yourself confused or, worse, believing in false information.
By openly discussing your money and finances, and by asking questions when you have them, you will learn more about how to manage your finances. Once you have more information, you’ll be able to come up with better strategies for building a strong financial future.
Because we know how important it is to talk about money, our team of financial professionals take the time to regularly answers questions about budgeting, money, and debt. If you have a question for our team, ask us online on Facebook, Twitter or through our website.
The questions here have been condensed or rewritten for clarity and simplicity.
How much of my income should go into savings?
The answer to this question depends on your particular situation. Not only will your current finances (and your debt) affect how much you should save, but there are other factors to pay attention to as well, such as how old you are as well as what you consider your financial goals.
The short answer is “save as much as you can afford,” but this doesn’t give you a good guideline to follow. A good standard to start with is 10% of your income. This may seem daunting, but you can work up to it, saving a little bit more each month until you’re eventually putting aside 10% of your income. Once you can reliably put aside 10% each month, try to increase it to 20%. This is a good amount to save as it will allow you to still live your life and meet your financial commitments while ensuring that your future is taken care of as well.
It’s also important to remember that there are different types of savings. There are savings that are earmarked for a specific goal (such as a vacation, a new car, etc.), there is your emergency fund (which is there to help you get through a sudden emergency, such as a job loss, illness, or unexpected expense), and there is also retirement savings.
When it comes to your emergency fund, it’s a good idea to put aside 3-to-9 months of your income. Again, this may seem like a big number, but you can build up your emergency fund over time. Having an emergency fund is crucial, since life is unpredictable. You never know when your car will break down, your roof will get a leak, or you’ll lose your job. If you don’t have an emergency fund, you’ll have to go into debt to afford your expenses, and this can be a dangerous situation to get into.
As for retirement, the amount you put aside each month will depend primarily on your age and how much you’ve saved. If your employer matches or otherwise adds to your retirement fund, then count the amount that they add. For instance, if you put aside 5% of your income and your employer matches those contributions, count this as saving 10% each month. As for how much you should save, a good guide is to have ten times your final salary saved by the time you retire. The sooner you start saving the better, as your money will have more time to grow.
What should I do to get better credit?
The first thing to know is that there is no “magic” way to improve your credit instantly. If a company promises that they can “fix” your credit for a fee, stay away. The only thing that can immediately improve your credit report is fixing an error, and you can do this yourself for free by contacting the credit bureaus.
To build or rebuild your credit rating, you will need to show the credit bureaus that you are able to borrow a responsible amount of money and pay it back on time. A good way to do this, for instance, is to make small purchases on your credit card and then pay off your balance in full each month. If you have bad credit and are unable to get a credit card, then you may want to consider a secured credit card. This is a card where you put down a deposit and then you are able to use the card like a regular credit card.