3 Personal Finance Tips from Our CFO - NYCM Insurance Blog

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Jul 15, 2020

3 Personal Finance Tips from Our CFO

Taking care of your finances is an important step in achieving overall personal wellness and planning for the future. But how do you make beneficial financial choices when you don’t know where to start? The good news is you don’t need to be a certified CPA to achieve financial wellness.

To help our readers, we asked our Chief Financial Officer, Chief Risk Officer and Treasurer, Mike Perrino for tips on how individuals can prioritize their personal finances and set themselves up for financial success.

Make a Budget and Stick to It

One of the first steps on the road to financial wellness is creating a budget for yourself and your household. To create an accurate budget, monitor your spending for a set period of time and track every single expense. Going through this exercise will create greater financial awareness, as it will allow you to not only understand how much money you and your family need to cover necessary expenses but also highlight opportunities for improvement.

Once you have a better grasp on your spending habits, you’ll be able to more effectively allocate resources for monthly expenses such as a mortgage, rent, car payments, groceries, and let’s not forget leisure time with friends and family!

“Like a well-built foundation that enables a well-built home to stand the test of time, a well-planned budget can serve as the foundation to your long-term financial well-being!”   

Focus on Paying Off Debts

Minimizing your debt is one of the best moves you can make for improving your personal finances. Debts incur interest, so the longer it takes you to pay them off the more you pay in the long run.

“One of the key aspects of maintaining your financial well-being is the ability to track your progress and celebrate your success along the way. For example, when considering the high interest carrying costs associated with credit cards, actively paying down this type of expensive debt is like paying yourself when you consider the interest saved. And while it may seem like a small win, doing so is certainly a reason to celebrate!”

Thankfully, there are a handful of strategies you can choose from to pay off your debts more quickly and efficiently.

       Debt Snowball: This is where you pay the minimum on all debts but place a primary focus on paying off the smallest first. Once you achieve this initial pay-off, take the amount you were paying on the first and start allocating it to the next largest outstanding debt. Continue with this process until you have paid off all debts.

       Debt Avalanche: Here, the focus is on paying off the debt with the highest interest rate first while still paying the minimum on all other debts. After the first debt is paid off, continue with the next highest rate and so on. 

       Seek Help: If you are feeling overwhelmed by your debt and find yourself not making much progress on paying it down, it may be time to seek professional help. You may find it beneficial to reach out to a credit counseling service or nonprofit agency to inquire about how to create a debt management plan that will help you get back on the road to financial wellness.

Plan for the Future

It is never too soon to start planning for retirement. Even if your glory days seem like a distant dream, the truth is, the sooner you begin putting money away, the more enjoyable those post-career days will be.

Start planning by first identifying your retirement needs - you will need approximately 70 to 90 percent of your pre-retirement income to maintain your standard of living once you stop working.

“Start by understanding what a pension plan may be providing you at retirement and then supplement this with contributions to your employer’s 401(k) plan.”

Absent a pension plan, you will need to understand if there is an employer contribution element to your 401(k) plan. Many plans have minimum employee contribution percentage levels to qualify for employer matching. You will want to strive to meet the minimum levels to realize the greatest value offered by your plan. 

Once you start putting money away, be disciplined in your approach and avoid any thought of using this money before retirement. Borrowing from your retirement fund is a risky choice that can quickly turn into a dangerous habit.

“It’s also a great idea to set up an automatic increase to align with your annual raise. This provides for retirement savings growth while diluting the impact on your personal or family budget plan.”    

It has been said that failing to plan is the equivalent of planning to fail. Establishing sound financial planning early in life can have a profound impact on your personal freedom to make the choices that allow you to enjoy life to the fullest. 

“The compounding effect of investing at an early age creates a wealth of options as life progresses. Be it the ability spending more time with family via the purchase of a vacation home, or perhaps experiencing the world with a loved one through travel, or having the option to retire early, good plans afford us the opportunity to dream bigger!”

Still not sure where to start? Click on the button below to learn more about effectively creating and managing a personal budget.