{"id":2378,"date":"2021-12-10T17:47:13","date_gmt":"2021-12-10T21:47:13","guid":{"rendered":"https:\/\/www.skypointfcu.com\/wph\/workarea\/?p=2378"},"modified":"2021-12-10T17:47:25","modified_gmt":"2021-12-10T21:47:25","slug":"8-rules-for-saving-borrowing-and-spending-money","status":"publish","type":"post","link":"https:\/\/www.skypointfcu.com\/wph\/workarea\/blog\/8-rules-for-saving-borrowing-and-spending-money\/","title":{"rendered":"8 Rules for Saving, Borrowing and Spending Money"},"content":{"rendered":"\n

This article provides information for educational purposes. NerdWallet does not offer advisory or brokerage services, nor does it recommend specific investments, including stocks, securities or cryptocurrencies.<\/em><\/p>\n\n\n\n

The best personal finance advice<\/a> is tailored to your individual situation. That said, a few rules of thumb can cut through the confusion that often surrounds money decisions and help you build a solid financial foundation.<\/p>\n\n\n\n

The following guidelines for saving<\/a>, borrowing, spending and protecting your money<\/a> are culled from nearly three decades of writing about personal finance.<\/p>\n\n\n\n

1. Prioritize saving for retirement<\/strong><\/p>\n\n\n\n

In an ideal world, you\u2019d start saving with your first paycheck and keep going until you\u2019re ready to retire. You also wouldn\u2019t touch that money until retirement. Even if you can\u2019t save 15% of your pre-tax income for retirement, as recommended by Fidelity and other financial services firms, anything you put aside can help give you a more comfortable future. Aim to take full advantage of any company match you get from a 401(k) at work \u2014 that\u2019s free money \u2014 and borrow against or cash out retirement funds only as a last resort.<\/p>\n\n\n\n

2. Save for a rainy day<\/strong><\/p>\n\n\n\n

You may have read that you need an emergency fund equal to three to six months of expenses, but it can take years to save that much. That\u2019s too long to put off other priorities, like saving for retirement. A starter emergency fund of $500 can be your first goal, and then you can build it up<\/a>. While you\u2019re saving, try to create other sources of emergency cash, such as a Roth IRA (you can pull out your contributions at any time without taxes or penalties), space on your credit cards or an unused home equity line of credit.<\/p>\n\n\n\n

3. Save for college<\/strong><\/p>\n\n\n\n

Got kids? Open a 529 college savings plan and contribute at least the minimum, which is typically $15 to $25 a month. Retirement savings comes first, but anything you can save will reduce how much your child may need to borrow. Also, research shows the simple act of saving for college increases the chances that a child from a low- to moderate-income family will go to college.<\/p>\n\n\n\n

4. Borrow smart for college<\/strong><\/p>\n\n\n\n

A college degree can pay off in higher earnings, but lenders may allow you to borrow far more than you can comfortably repay. If you\u2019re borrowing for your own education, consider limiting your total debt to what you expect to make your first year out of school. If you\u2019re a parent borrowing for a child\u2019s education, aim for payments that are no more than 10% of your after-tax income and that still allow you to save for retirement. If your payments are higher than 10% of your after-tax income, investigate income-driven repayment plans that could bring down your costs.<\/p>\n\n\n\n

5. Use credit cards as a convenience<\/strong><\/p>\n\n\n\n

Credit cards offer convenience and can protect you from fraud and disputes with merchants. But credit card interest tends to be high, so don\u2019t carry credit card balances if you can avoid it. If you routinely pay your balances in full, look for a rewards card with a sign-up bonus that returns at least 1.5% of what you spend.<\/p>\n\n\n\n

6. Finance your home smartly<\/strong><\/p>\n\n\n\n

If you want to be a homeowner, the best time to buy your first home is when you\u2019re financially ready and in a position to stay put for a few years. Opt for a mortgage rate that\u2019s fixed for as long as you plan to remain in the home, and don\u2019t make extra payments against the principal until you\u2019ve paid off all other debt and are on track for retirement.<\/p>\n\n\n\n

7. Buy used vehicles and drive them for years<\/strong><\/p>\n\n\n\n

Buying a car right now isn\u2019t a great idea; supply-chain kinks and other pandemic-related issues have inflated the cost of both new and used cars. In general, though, buying a used car can save you a ton of money over your driving lifetime, as can driving your car for many years before replacing it. These days, a well-maintained car can last 200,000 miles without major issues, according to J.D. Power. This means you can get roughly 13 years of service out of your car if you drive it 15,000 miles a year. Ideally, you would pay cash for cars. If you need to borrow, try to limit the term of your loan to a maximum of five years.<\/p>\n\n\n\n

8. Insure against catastrophic expenses<\/strong><\/p>\n\n\n\n

Use insurance to protect yourself against catastrophic expenses rather than smaller costs that you can easily pay out of pocket. If you have sufficient savings, consider raising the deductibles on your policies to save money on premiums. Be careful about high-deductible health insurance policies, though. Having a high deductible could cause you to put off medical care, and it\u2019s better to err on the side of safety when it comes to health.<\/p>\n\n\n\n

This article was written by NerdWallet and was originally published by The Associated Press.<\/em><\/p>\n\n\n\n

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