BASIC STEPS TO FINANCIAL FITNESS

The way you handle your finances is a personal choice. The decisions you make about them change over time and may differ from your friends' or your parents'. Still, there are some broad guidelines that may help you get better control on your financial plans.

Budget
Start by comparing your income to your current expenses. Create a spreadsheet so you can clearly see how much money you bring in and how much you spend. If money is tight, use this spreadsheet to see which non-essential expenses you can cut back on.

Reduce Debt
Watch how you use credit cards. If you can’t pay off the balances in full each month, you are overspending. To avoid high interest payments, try to live at or below your means and curb your credit card usage. This will not only decrease your debt but help you to qualify for lower interest credit cards and loans.

Save for Emergencies
How much should you be saving in an emergency fund? Financial experts suggest putting three to six months' take-home pay in a savings account. That can take time to build up, and you may need to raid your account even while you're adding to it. Still, if you consistently put aside at least 5% of your take-home pay, using payroll deduction, you'll reach your goal.

Create a Nest Egg
If your employer offers a 401(k), put a percentage into your 401(k) that equals what your employer will match. Anything less and you're actually giving up free money. Ideally, contribute the maximum your employer allows into your 401(k). Can't swing that much while you're saving for your child's future education expenses? Keep this in mind: You can borrow to meet higher education expenses, but you can't borrow for retirement expenses.

If your employer doesn’t offer a 401(k) or you are self-employed, look at other options, like a traditional IRA, a Roth, or a Simplified Employee Pension IRA.

Get adequate insurance
Buying good insurance for your health, car, and home (or renters’ insurance), is a good investment. It will protect your finances from high medical costs, damages due to car accidents, and against losses to your personal property.