18 Financial Planning Tips to Better Your Finances Right Now

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Smart Financial Tips Because Your Money Matters

Are you looking for ways to better your finances? If yes, you have arrived at the right place.

Money isn’t everything. However, life is much more difficult than it should be without enough money.

So, let’s explore 18 financial planning tips to better your finances for more money in the short and long term.

Let’s get started.

18 Ways To Better Your Finances At Any Age

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Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.

Making Money

1. Maximize Earnings Power

Anytime is a great time to make more money. Consider the following ways to add to your income:

Ask for a raise. Get paid more for doing what you do today.

Climb the ladder at your current employer. Seek greater levels of responsibility and the compensation that comes with it.

Work more if you get paid by the hour, and seek premium pay for overtime.

Change employers. Make more money for the value you provide by working for someone new.

You need to knowWhy Some People have Money and Others Don’t

2. Diversify Income Streams

Consider additional ways to make money from your time and skills.

For example, has your partner spent time out of the workforce raising kids? If yes, and the kids are now more independent, create a dual-income household.

Do your skills lend themselves to hourly consulting or project work? If yes, make a side income selling those skills.

Do you have a viable small business idea? Then, start a side hustle to earn some extra cash.

3. Create Passive Income

Use your assets to make passive income. Here are some ways to go about it…

Renting out your car is also known as car sharing. Companies like HyreCar and others offer this service and can help you get started.

Rent out your real estate, whether a room in your house, the condo you just moved out of, or your vacation home. Rent it!

Reposition your financial assets. Your financial investments (cash, bonds, and stocks) can be an excellent source of passive income, including interest and dividends. I’ll discuss this topic more later.

Reducing Expenses

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4. Make A Budget And Monitor It Monthly

Set a budget every month and do your best to stick to it.

Break your spending down into categories such as:

  • Housing (rent or mortgage)
  • Utilities
  • Groceries
  • Transportation
  • Entertainment
  • Travel

At the end of each month, compare your spending to your budget for each category. Reflect on your progress and make adjustments as needed.

Don’t beat yourself up if you overspend. Learn from it and strive to do better in the future.

Related readingHow To Stop Living Paycheck to Paycheck

5. Downsize Your Housing

Housing costs typically take up the largest share of a household budget. So, consider reducing these costs through downsizing.

Most importantly, avoid buying or renting a larger-sized home than you need. A smaller footprint comes with lower mortgage payments, reduced rent, cheaper real estate taxes, utility bills, and insurance costs.

6. Spend Wisely On Automobiles

After housing, autos and transportation costs consume a large share of your household budget. Fortunately, controlling your spending in this area is pretty straightforward.

First, keep your vehicles as long as they are practical.

Updating your car is always a balancing act because you don’t want to spend too much on costly repairs and maintenance on an aging auto.

When it’s time to replace your car, buy a used vehicle.

The first year of ownership of a new auto is typically more expensive due to the steep depreciation in value after a new car is pulled off the lot.

7. Check Your Auto Insurance

Bid out your auto insurance every few years.

Insurance carriers typically raise rates annually until they are challenged with a competitive bid.

Assess your deductibles.

Higher deductibles will reduce your insurance premiums. However, ensure your emergency fund is adequate to pay for the deductible in the event of an accident.

Consider eliminating comprehensive and collision insurance on high-mileage, low-value vehicles. These coverages are not required by law and can be a poor financial choice for older cars.

Learn more – How To Make Financial Goals that Stick

8. Fine Tune Your Other Insurance Coverages

Protecting your assets is an important part of improving your finances.

Check your insurance plans and cover only what you must, most importantly, what you cannot afford to lose. That’s my simple rule of thumb because over-insuring wastes money, while under-insuring creates financial risk.

Here is a rundown of different types of insurance:

Property & liability insurance. For loss of home, physical possessions, and autos.

Life insurance. When family or loved ones are dependent on your earnings.

Umbrella insurance. Additional liability coverage for households approaching a million dollars net worth.

Health insurance. To protect against the high cost of unexpected health care expenses.

Disability insurance. To protect the earnings power when you or someone else is dependent on your income.

Long-term care insurance. In the event you or your partner needs care in your advanced years.

9. Spend Only On What You Value

Think carefully about what you value in life. What you love may include travel, movies, home renovations, dining out, wine, sporting events, or something else.

What you value is unique to you. So, whatever it is, allocate money in your budget to what you love and value. Then, reduce or eliminate expenses everywhere else.

Next up, saving money. But before you continue, please PIN IT:

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Saving Money

10. Top Off Your Emergency Fund

Emergency expenses are the enemy of your finances. Thus, assign any extra money from your monthly budget to emergency savings.

Most financial experts recommend having 3-6 months of living expenses available. Review your budget’s essential monthly expenses to determine your optimal emergency fund balance. Put the extra money in a high-interest-bearing savings or money market account.

Finally, reserve your emergency fund for unexpected and vital expenses like:

  • Medical bills
  • Auto repairs
  • Home maintenance

11. Make A Plan To Become Debt Free

Identify and itemize your debts. Reduce your non-mortgage debt by using any excess cash identified from your monthly budgeting process.

Most people owe money for:

  • Credit cards
  • Student loans
  • Auto loans
  • Personal loans

Pay off your credit cards first. Then, target any other loans you have. Making timely payments will improve your credit score.

12. Maximize Your Employer Retirement Plan

Increase your savings rate for a secure retirement by contributing to your employer’s 401(k) or 403(b) plan. Plus, most employers will also contribute to your account.

But you must participate at a minimum level to receive your employer’s match. So, check with your human resources department and get signed up!

More about money Smart Financial Goals that Cover All The Bases

13. Fund An Individual Retirement Account

If you earn income but don’t have access to an employer retirement plan, you can contribute to an Individual Retirement Account (IRA).

There are two types of IRAs: Roth IRAs and Traditional IRAs. Either type is a good choice, but each has its own pros and cons.

14. Take Advantage Of A Health Savings Account

Consider contributing to a health savings account (HSA). HSA accounts are an outstanding way to save for medical expenses free of income taxes.

If you do not need the funds in your HSA for medical expenses, your account provides for tax-deferred savings. However, understand that taxes will be due upon withdrawal if the funds are not used for qualified medical costs.

Investing Money

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15. Invest Outside Of Retirement Accounts

Invest in a taxable brokerage account after all your savings goals are addressed. Investing wisely can dramatically better your finances over the long run.

Stocks and low-cost exchange-traded funds (ETFs) are the best investments for most investors. These investments are easy to buy and hold in an online brokerage account.

Helpful info – Best Investments for Beginners

16. Establish An Asset Allocation Target

Allocate your investment assets wisely so a fall in the financial markets won’t ruin your finances.

For example, here is a conservative asset allocation model:

  • Risk-free assets – 10%
  • Bonds – 20%
  • Real estate – 20%
  • Stocks – 50%

Your asset allocation should be suitable for your age and risk tolerance. Just remember that higher allocations to real estate and stocks mean a greater risk of loss in the short term.

Cash and bond values are more stable. However, historically speaking, stocks and real estate offer better long-term investment returns.

Must readHow To Start Investing Before it’s Too Late

17. Invest In Income Generating Financial Assets

Bonds and cash offer passive investment income; however, my favorite income-generating assets are dividend stocks.

Dividend stocks provide current income, dividend growth, and long-term capital gains.

Not sure where to start dividend investing? If so, check out the Financial Freedom Dividend Investing Course by Simply Investing.

I learned a ton about investing for passive income from the course, and you can, too.

18. Review Your Investments Annually

Review your investments at least once per year.

First, understand all your investments and why you own them. Second, ensure your asset allocation hasn’t drifted from your target. Finally, ensure your investments make sense for your age and risk tolerance.

Okay. That’s all for today. Here are a few parting thoughts.

Must read – Smart Investing Tips to Turn a Little Into A Lot

How To Better Your Finances – Wrap Up

Take control of your money and better your finances today. My best money tips for building your wealth include:

  1. Maximize earnings
  2. Diversify income streams
  3. Create passive income
  4. Make a budget
  5. Downsize your housing
  6. Spend wisely on autos
  7. Check your auto insurance
  8. Fine-tune other insurance
  9. Spend on what you value
  10. Top off your emergency fund
  11. Reduce debt
  12. Contribute to your 401(k)
  13. Fund an IRA account
  14. Open an HSA account
  15. Invest in a brokerage account
  16. Establish an asset allocation
  17. Invest for passive income
  18. Check your investments annually

Good luck with your finances. Before you go, PIN IT:

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Author Bio: Tom Scott founded the consulting and coaching firm Dividends Diversify, LLC. He leverages his expertise and decades of experience in goal setting, relocation assistance, and investing for long-term wealth to help clients reach their full potential.

Better Your Finances Now Because Money Matters!