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Tips to maximize your finances

January 03, 2016
Whether you are wealthy or just getting by, you can benefit from maximizing your finances. Here are a few tips to help you do just that.

Retirement saving
It's becoming less and less likely that you can count of the government or your employer to take care of you financially after you retire, so it's important you prepare to do so yourself. While the average person can't afford to max out retirement accounts to the levels allowed, it's important to do one thing at a minimum: contribute enough to your defined contribution plan to get any matching contributions offered by your employer. If you fail to do so, you are throwing away free money.

Emergency fund
Next to retirement funding, your other big savings goal should be putting together an emergency fund. This should be kept in an after-tax account, preferably one where your principal is protected and you have immediate and easy access to the money. Many experts recommend saving at least six months' worth of salary or expenses, but this isn't realistic for most people. Shoot for at least one month's worth, three if you can.

Minimize debt
There are very few situations in which you should take on debt. A house is an investment considered worth debt, as are education and starting a business. Otherwise, you should avoid it. At the very least, avoid racking up debt on credit cards, which carries high interest rates and is difficult to pay off at the minimum payment required.

Minimize taxes
Though taxes are a necessary part of life, you should avoid paying more than you have to. Take all deductions and credits to which you are entitled and take advantage of all options for tax-deferred savings, including retirement savings, healthcare savings and others.

Following these tips will help you get the most out of your financial situation, whether you are a millionaire or live paycheck to paycheck.