Navigating the world of personal finance can be overwhelming, even for an adult who has quite a bit of experience in the working world. With some smart planning, a good strategy and understanding of the basis, you should be able to develop the money-management skills you need to get your finances under control.
Here are some fundamental truths that everyone should be aware of:
1. Set Goals
If you don’t have a set destination to work towards it can be hard to find the motivation to save.
Whether it’s a house you’ve been eyeing or your retirement, carefully define these goals and figure out how much you’ll need to save so you can craft a plan to get there.
2. Start as Soon as You Can
Ever heard of compound interest? This process allows the interest on your savings to earn even more interest. The sooner you start to save for retirement, the more time your money has to grow and take advantage of compound interest.
Time really is a powerful lead for your investments so waiting just a few years to start saving may significantly reduce the size of your retirement nest egg.
3. Spend Less Than You Make
It’s incredibly easy in this consumer-driven world to live beyond our means but a good rule of thumb is to try and save at least 15 percent of your income. If you find it easy to overspend try paying for things like clothes and groceries with cash instead of a credit or debit card.
Withdrawing a fixed amount every month helps you be more aware and make better spending choices.
4. Create a Budget
Budgets play a critical role in paying off debt, controlling your spending and staying on track towards your goals. It’s easy to spend a little extra some days than others but if you have a budget in place or set a daily spending limit you’ll be able to adjust and make up for any oversights another day.
5. Put Your Savings on Autopilot
Have your savings contributions automatically deducted from your paycheck a direct deposit into a brokerage account. If you put money aside before you even see it you won’t miss it.
6. Don’t Go House Crazy
Be careful not to over-buy when shopping for a new home. A big mortgage payment can really set you back with your savings.
Try to think about what you truly need out of your home so you have the freedom to spend on other necessities.
7. Protect Yourself
A fully complete financial plan includes provisions to protect your life and your future. Life insurance and estate planning are key to making sure your obligation to your loved ones is met, even after you are gone.
Start shopping for life insurance as soon as possible if you don’t have it already. As soon as that is done, make your will and get it filed.
9. Don’t Let the Financial World Intimidate You
Contrary to popular belief, you don’t need to be a financial expert on the stock market to start building your portfolio and preparing for the future.
All you really need to do is work on building a solid plan that you will commit to and stick with over the years.