Effective money management is a skill that is essential in today's changing economy. Sadly, many people lack even basic money managing skills for a variety of reasons. Making good financial decisions can help you live your best life. Here are a few tips to help lay the foundation of financial success.
1. Create a Budget and Stick to It
Making a budget is the first step in building wealth and getting out of debt. However, it is easy to stop following that budget when you want something and there isn't enough room in the budget for it. Look at the budget often, make sure you are spending appropriately, and remind yourself why you are budgeting.
2. Goals Are Important
Instant gratification is a slippery slope and keeping a goal in mind can help curb those temptations. Maybe you are saving to take your family on an exotic vacation. Envisioning or day dreaming about what that vacation might be like will help keep you on track and keep your budget intact.
3. Stop Charging
There is a time and a place for utilizing credit cards. Credit cards are one of the easiest debts to incur and one of the hardest debts to eliminate. One of the main reasons for this is the high interest attached to them, growing exponentially until they become a serious problem. Stop using them altogether and pay cash.
4. Pay Off High Debt You Already Have
If you already have debt, it's a good idea to create a plan of attack and get credit cards paid off quickly before any other debt. Start by chipping away at the highest interest cards first and work backward until they are all paid off.
5. Save Early and Save Often
Quicken gives a great example of saving early and saving often for retirement. If a 21-year-old saves $17.50 a day until retiring at age 65 at 5% annual investment return, they can retire a millionaire. At age 30, that amount doubles and at age 40 it quadruples. Keeping your debt low can help you achieve this goal freeing up more income to save for retirement.
6. Put Some Back for a Rainy Day
It's a good idea to prepare an emergency fund for unexpected repairs, unemployment, or medical care. Ideally, you want to have enough to cover three months of living expenses in the case of unemployment. For example, if your monthly bills are $1,000, you should plan to have at least $3,000 in savings.
7. Create a Side Hustle
It's sometimes useful to find several different ways to earn money besides your normal 9 to 5. Side hustles can give you extra income to pay debt and it can also serve as a safety net in a sense. It's never a smart investment to put all your eggs in one basket, so why would you depend on only one stream of income? Creating a side hustle should be something you enjoy doing that doesn't seem like work. Perhaps you like to crochet in your spare time. Why not open an Etsy shop and sell your creations online? The internet has multiple ways to help you find your new side hustle.
No matter what your current financial situations, a little hard work can help you get your feet under you and not only start getting out of debt but also start building wealth. Starting with these basics can help you achieve your goals well into your golden years. Money management is an essential skill which can seem daunting. Education is the key. Learning all you can from online resources as well as consulting a professional can help you on your way.