Article Your money, your future
Managing your credit and debt
Are you confidentyou’re saving enoughfor your future? No matter where you are in life, good money management skills can put you on the path toward achieving your goals. Keep reading to learn more.
Key Takeaways:
Review your current financial situation—the amounts you owe, how much you're saving and the balances in your accounts.
Build a realistic and flexible budget that reflects your current income and expenses.
Organize your goals into short-, intermediate, and long-term goals, then prioritize and make trade-offs when necessary.
Control the debt you owe, have a spending plan and watch your cash flow.
Assess your current financial situation
Before you can identify the steps to save and manage your money effectively, take stock of your personal finances. Review the amounts you owe—on student loans, car loans, mortgages, credit card debts, etc. Look at how much you’re saving and the balances in your accounts. Are you confident you’re saving enough for your future?
Make a plan and set goals
Setting goals and developing a strategy to reach those goals helps you make the most of the money you have. Here’s how to go about it.
Organize your goals into short-, intermediate and long-term goals. Short-term goals are the things you’ll need money for in the next few years, like a new car. Long-term goals are financial needs that are far in the future—retirement is an example. Intermediate goals fall somewhere in between. The key is to prioritize your goals and make trade-offs when necessary.
Starting to save and invest early makes it easier to meet financial goals. Over time, even small amounts of money can grow into a sizable nest egg.
Use the power of compounding
The sooner you start to save and invest, the more you can potentially benefit from compounding. See the example below to see how compounding works.
The power of an extra $101 - Weekly contribution
No. of years | No. of years | $10 | $10 | $10, plus an extra $10 | $10, plus an extra $10 |
|---|---|---|---|---|---|
No. of years | 5 years | $10 | $3,102 | $10, plus an extra $10 | $6,205 |
No. of years | 10 years | $10 | $7,500 | $10, plus an extra $10 | $15,001 |
No. of years | 20 years | $10 | $22,573 | $10, plus an extra $10 | $45,147 |
No. of years | 30 years | $10 | $52,865 | $10, plus an extra $10 | $105,731 |
No. of years | 40 years | $10 | $113,742 | $10, plus an extra $10 | $227,484 |
Make savings automatic
Employer-sponsored retirement plans often come with built-in benefits. The amount you want to save can be taken out directly of your paycheck and deposited into your plan account. The savings and your tax advantages are automatic. Plans typically offer a range of investment choices so you can manage risk by diversifying your savings. As useful as the diversification strategy is, it is important to understand that it does not ensure a profit or protect against losses in a declining market. There are always risks associated with investing in securities.
Control your credit card debt
The benefits of paying off any credit card debt can be huge. Consider the following to help get ahead of debt:
- Pay more than the minimum amount due
- Pay bills on time by scheduling online bill payments
- Pay off credit card balances with higher interest rates first
Establish a fund for unanticipated costs
It’s a good idea to have a plan in place to pay for unanticipated costs. If you have no emergency savings, it may take a while to accumulate funds. You may want to consider having enough money to cover up to a year’s worth of expenses.
Have a spending plan
You should know exactly where your money is going. Write down or use a phone app to track your expenses. Expenses typically fall into three categories:
- Fixed expenses such as a mortgage or rent, taxes, insurance and auto and other loans.
- Variable expenses including utility and phone bills, groceries and credit card charges.
- Discretionary expenses such as dining out, cable TV, vacations and gym memberships. You have the most control over this category.
Know your income
Your income includes wages and bonuses from your job and other sources such as rental properties, businesses or investments. Track your income over several months to account for any variations.
Watch your cash flow
If you’re spending less than your income, your cash flow is positive. Still, you may consider looking for places to trim your spending to save more. If you’re spending more than you’re earning, you have a negative cash flow and should reduce your spending. It‘s well worth it to control your spending and increase your savings.
Build a budget
Your budget should reflect your current income and expenses. Account for your fixed expenses first and then plan for variable expenses. Also set aside money for expenses that are paid sporadically, such as taxes and insurance. Assign a category to saving for your future. Make your budget realistic and flexible. The money needed in each category may change over time. You might pay off your car loan, for example. Reviewing your budget periodically will allow you to reflect new amounts or new categories.
Put what you’ve learned to work
Now that you have a better understanding of howto manage your money, it’s time to take charge ofyour finances and put yourself in a position to achieve your goals.
As a firm providing wealth management services to clients, UBS Financial Services Inc. offers investment advisory services in its capacity as an SEC-registered investment adviser and brokerage services in its capacity as an SEC-registered broker-dealer. Investment advisory services and brokerage services are separate and distinct, differ in material ways and are governed by different laws and separate arrangements. It is important that clients understand the ways in which we conduct business, that they carefully read the agreements and disclosures that we provide to them about the products or services we offer. A small number of our financial advisors are not permitted to offer advisory services to you, and can only work with you directly as UBS broker-dealer representatives. Your financial advisor will let you know if this is the case and, if you desire advisory services, will be happy to refer you to another financial advisor who can help you. Our agreements and disclosures will inform you about whether we and our financial advisors are acting in our capacity as an investment adviser or broker-dealer. For more information, please review the PDF document at ubs.com/relationshipsummary
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