It’s unfortunate that personal finance is not a compulsory subject in college and high school. That’s one reason so many are relatively clueless when it comes to money management in the real world. Getting started is the hard part. So to help you understand what you need to know about personal finance, here are eight tips for a more secure financial life.
1. Learn Self-Control
Consider yourself lucky if you learned self-control as a child, but if not, it’s a skill that will help you keep your finances in order. It’s not a crime to buy things you want when you want; however, it’s advisable to be patient until you’ve actually saved money for the purchase.
If you develop the habit of pulling out your credit cards to make purchases all the time, you may be heading down the wrong path. In 10 years time, those bills could haunt you. If you’re determined to use them, ensure you always pay your balance in full when it’s due and be sure to avoid carrying more credit cards than you can keep track of.
2. Take Control of Your Own Financial Future
Learn to manage your finances, or else others will help you mismanage them. Read a few books about personal finances. Don’t just rely on the advice of others. Educate yourself. Knowledge is power. That will make it tough for anyone to catch you off-guard. Avoid friends who want to go out every weekend and blow money around town. Your understanding and knowledge of how money works is the very first step toward making your money work for you.
3. Always Know Where Your Money Goes
It’s critical to track your expenses and be certain you aren’t spending more than you make. This is where budgeting comes in. Budgeting is vital to keeping you on a healthy path. It gives you insights to help make small, manageable changes to achieve your ultimate goal. This one tip will significantly impact your finances.
Additionally, try to keep your recurring monthly expenses as low as possible. This will help you save over time. The money you waste now on a posh apartment could buy you a charming house before you know it.
4. Start an Emergency Fund
Pay yourself first. No matter how much you owe, how low your salary is, or even how much credit card debt you have, pay yourself something. Find an amount, no matter how small and save it in an emergency fund every month.
An emergency fund helps you prepare for the unexpected and could keep you out of financial trouble. If you learn the habit of saving early, you’ll soon see a good return. You could end up with enough for a down payment on a house, or better yet, possibly even enough to purchase it outright with cash.
Don’t keep your savings under your mattress. Put it in a high-interest savings account. Get a money market account or certificate of deposit. Otherwise, inflation will erode the value of your savings.
5. Save for Retirement Now
Next, start saving for retirement now. Just like you started your educational journey by enrolling in kindergarten, you need to prepare for your retirement in advance. If you start saving for retirement as soon as you’re able, compound interest will work to your advantage.
Embrace company sponsored retirement plans. The contribution limits tend to be high and most companies offer a match to your contribution. That’s free money!
6. Get a Grip on Taxes
Knowing how income taxes work even before your first paycheck is important. You need to understand how to calculate your salary after taxes to know if it’s enough money. That lets you know if you can meet your financial obligations and goals. There are a variety of online calculators out there to help.
For instance, $35,000 a year in New York will leave you with $26,430 after taxes without exemptions, that’s $2,032 a month. Also, if you’re looking for a raise with a job change, you need to understand how your marginal tax rate affects your salary. An increase from $35,000 a year to $41,000 a year won’t give you an extra $6,000 as you might think. You’ll actually only end up with $4,129, annually, or an extra $344 a month.
7. Guard Your Health
Get health insurance now if you don’t have it already. Meeting monthly health insurance obligations are necessary and not impossible. You’ll see the benefits in the long run. Why pay thousands if you end up in the emergency room for a minor broken bone?
Get quotes from different insurance companies. Searching for lower rates keeps more money in your pocket. Don’t forget to take daily steps, maintaining a healthy weight by eating fruits and vegetables, exercising, avoiding excess alcohol, not smoking and even driving defensively.
8. Guard Your Wealth
Ensure your hard-earned money doesn’t vanish into thin air by safeguarding it with various types of insurance that benefit you. In the long run, these protect your health and your wealth. When the need arises, the insurance is there to provide you income, especially if you’re ever unable to work or face a tragedy.
Find a financial planner to provide personalized advice if you want help managing your money. Also, protect your money from taxes and inflation with your retirement accounts. Earn interest on money market funds or interest savings accounts, which usually give high-interest rates.
Always keep in mind you don’t need a special background or degree to manage your finances. Following these fiscal rules can help you work toward financial prosperity.