Step #3: Get some emergency savings
|Next it's a good idea to build up
some emergency savings. Three to six months of income that is
in a safe investment that you can get to. A money market
account is a good place for this money, but you should ask your
financial advisor on the best place for this money. Emergency
savings are to be used for just that, emergencies. This way
you don't have to run up your credit card again if your car breaks
down or you lose your job or whatever. It will allow you some
breathing room. Get this savings, it's key to staying out of
debt when those crisis occur.
Getting 6 months of savings is no easy task. If this proves too daunting at first then try for 1 month. Save a little at a time. Then work for 3 months and eventually you will get to 6. Having this money in the bank as a security blanket will give you some peace of mind and should be worth the effort.
Once you get this savings you must use discipline in not spending it every time you want something. It has to be saved for times when you have no other choice. Things like paying the rent, medical bills, mortgage, gas bill, phone bill, etc. If you use this for getting a new couch or TV, then you're not using it the correct way and it won't be there when you really need it.
Hopefully you will never need to use this savings and it will come in handy for early retirement or for something fun later in life when you are fiscally secure.
Step #4: IRA and 401k
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#1: Renegotiate debt, consolidate debt, and settle
Pay off your credit card
3) Get some emergency savings
4) Start investing in 401k plan or IRA
5) Pay off other debt
6) Invest conservatively
Financial Mistakes to Avoid
Holding Loser Investments and Stocks
Not saving for Retirement
Interest Only Home Mortgages
Cash Value Life Insurance
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