Beyond the Basics: The Next Steps in Personal Finance

Beyond the Basics: The Next Steps in Personal Finance

You’ve made a budget that you largely stick to, have paid off all your credit card debt or avoided it altogether, and have established an emergency savings account. What happens next? What do you do after you’ve got the basics of personal finance squared away? You might be saving for the long term, such as building a retirement account through your work, but what other financial issues should you be attending to?

Find the Right Insurance

If you don’t have disability and life insurance already, this is a good time to take a look at your options. Many people will be covered through their employer for disability, but you can purchase it privately if you are not. You can also look into life insurance. Choosing the right plan can be a little confusing because the type and how much you need will vary depending on your personal circumstances, including whether or not you have dependents. An agent or online resources may help you narrow down your choices. Finally, if you rent instead of own, you may want to consider a plan to protect your belongings.

Build Up Your Credit

If you are at the beginning of your working life, credit reporting agencies may not have much data about you. One way to build a strong score is to borrow and spend responsibly. You can do this with a credit card by paying off what you charge on it regularly, but you can also increase your score and inquire about a personal loan. If you have any high-interest debts, you might be able to take out a loan at a lower interest rate and use that to pay off those debts. You’ll still have the personal loan to pay, but the lower interest will save you money. While it’s generally not a good idea to go into debt for things that you don’t particularly need, if you have cleared your existing debt, you might want to take out a small loan that you are confident of being able to repay. This may cause a temporary dip in your rating, but prompt repayment will show creditors you are reliable and will raise your score in the long run.

Set Medium-Term Goals

This is a good time to identify what you would like to save for in the near future, whether it is a down payment on a house, a major home renovation or a college education for your children. However, it can be easy to get so focused on building the financial security that you lose track of the fact that one reason to be responsible with your money is so you can spend it on things that genuinely matter to you. It’s important to remember that you can save up for fun things as well. Perhaps there’s a trip you’ve always wanted to take, or maybe you want a great home entertainment system or a high-quality piece of furniture. You shouldn’t spend irresponsibly, but allowing yourself to splurge occasionally can help you stay motivated and disciplined the rest of the time.

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