We all go for professional training, be it in human resources or engineering, depending on areas of specialisation, but there is no course on how to handle finances when we become adults. This explains why a lot of people easily spiral into debts because they do not know how to manage their money and use credit correctly. So, is there a remedy?
Noting the gap, some education systems are now introducing personal finance to high school training. What an excellent way to prepare the next generation for success? However, this opportunity might have passed if you are past high school, but you have a reason to smile because we will bring it back right here. This post will review the most important things that everyone needs to understand concerning money. These tips will help you to live a better financial life, seeing your investment and savings grow with time.
Learn Self-Control and Make it Part of You
Did you get this skill taught to you by your guardian when small? If you did not, it is paramount to learn it to be able to maintain personal finances in the best shape. Let’s take the example. Suppose you want to buy an item, but you do not have money at the moment? Well, you can immediately buy it on credit right away, but the best option would be waiting after making enough savings.
To make purchases for items like a pair of jeans or television, you have the option of using your credit card. But this comes with high-interest rates, which can at times hit 30%. This means you will be paying a lot of money and the credit also risks pulling you down into the abyss of debts. The better option would be having a debit card that links directly to your credit card. It is like paying for your products in cash.
If you are unable to pay the credit card balance every month but have a habit of using them simply because they are convenient, there is a risk of still being in debt for the next ten years. So, unless it is an emergency, consider clearing all your credit card balances in full. This will also go a long way in building a positive credit history.
Take Full Control of Your Financial Future
One fact you must appreciate about finances is that if you are unable to take personal control, someone else is waiting to mismanage it. In most cases, these people target to rake more from you, not caring whether you will be left in debt. For example, you will find ill-intentioned commission-based financial planners. Note that this does not mean that all of them are bad, but it might be challenging to identify those well-intentioned.
Instead of going for expensive advice, why not take charge and this wisdom is available in resources around you. Check for books by financial experts you can trust and go for the advice they offer. Once you have the knowledge, stay ahead of your finances and avoid getting caught off-guard. If your friends want you to go out and blow a lot of money, let them find you prepared with a set budget for the weekend with credit cards and debit cards nowhere close. This way, you are only able to spend what you planned and have no room to borrow from a credit card.
Always Know Where Your Money Goes
There is no way to take control of your finances without budgeting. For example, after looking at the cost of lunch and adding up to see the total for the entire month; you will realise the importance of being in control of the daily experience.
As you focus on keeping the cost low, cutting down the recurring monthly expenses can also save more money over time. Instead of renting a high-end apartment costing an arm and leg, why not go for something cheaper? The amount you save might be enough to help you own a house sooner than you can imagine.
Start and Maintain an Emergency Fund
One of the most important facts about money is that no matter what you do, it is paramount to pay yourself first. Just like you pay yourself, it is vital to stack some emergency funds at the end of every month. No matter how much your student loan is, the credit card debt, and salary, having a growing emergency fund is paramount.
With a ready emergency fund, you are sure of staying away from trouble. For example, you will not get disturbed because of an unexpected health issue. Indeed, developing a habit of saving could come with more benefits. With time, you will not just be saving money for emergencies but also for vacation, retirement, and even down payment for a home.
When it comes to savings, there is a secret. Instead of putting the cash into a checking account where it will earn 0% interest, consider high-yield saving accounts. You might also want to consider a money market account. If you don’t, inflation is likely to erode the amount saved rapidly.
Commence Saving for Retirement Now
When you were in kindergarten, the future seemed so far away. However, that far away comes faster than you can imagine. Therefore, it is essential to ensure you start saving right away and the amount you put forward is going to earn compound interest in the coming years.
As a young adult, you might ask, "Is it really important to start saving in your 20s?”It is very important, and we are going to demonstrate with an example. Imagine you start investing in a market, say $100 every month with an average return of 1% per month. This translates to 12% in a year. Now, contrast this to another person who starts saving when 30 and commits $1000 per month and continues for the next 10 years until he is 40. By the time you are getting to 40, your account will be over $1.17 million while that of your friend will be $230.
If you can, go for the company retirement plans because they match a section of your contribution. It is pretty like getting some free cash. If you do not have access to company plans, consider setting your own IRA. No matter how much you commit, it will ultimately build into a huge and helpful amount.
Take Control of Your Taxes
Before getting the first pay-check, try and grasp how taxes, especially corporate tax works. When you get that first salary, figure out whether it is enough for you after all the tax deductions are made. The good thing about this is that you do not need to sweat because there are many online calculators to help you get the exact amount that you need to pay. The calculators will correctly determine the gross pay, the amount that goes into taxes, and what is left for you.
With time, it is important to learn how to calculate personal financial taxes in order to be in full control. Indeed, it is not all that difficult. Unless you are in a very complex financial situation, calculating the taxes you need to pay should not be so difficult. You might also want to install a finance app.
Stay in Good Health
You cannot talk of good finances if you are not in good health. The best way to do this is to get insurance cover. Well, some people indicate that the premiums are expensive, but look here. If you think the premiums are too high, what will you say when you find yourself in a theatre where a lot of money is required? Let's put it this way: you need health insurance to cover for the bulk of unexpected medical-related expenses.
If you are employed, your employer might provide reliable insurance to cater to your health needs. In case you are not employed, this is not a reason not to have insurance cover. There are many insurance plans that you can select, but it is very important to scrutinise them and only pick the best.
In the event of a medical issue, you will not need to rush to your savings or sell personal items to meet the cost. The insurance cover will take care of it. Even when you might need to chip in, your emergency kit will be there to address the bulk of the problem at hand.
Use Every Available Channel to Protect Your Wealth
When you work so hard to earn your money, it is crucial to ensure it is protected. No effort should be spared to keep it safe. So, how exactly should you protect your wealth? Here are some tips.
- If you opt to rent your facility, get rent insurance.
- Use disability insurance to ensure you have some cash flowing to your account in case you are unable to work or stay out of work for long periods.
- If you prefer working with a money managing expert, go for a fee-only expert to offer the services you want.
- Open a retirement account to protect your money from taxes.
Borrow Money and Invest Wisely
This list cannot be complete without including the need to borrow money and invest. If you want to expand a business to create another stream of income, it might be unwise to wait for ten years to make savings. The better option would be taking a loan, opening the business, and repaying it in line with the agreed terms and conditions.
Indeed, taking out a loan is a good thing if you manage it well because it allows you to repay in instalments and you can use it to build a good credit history. Let’s put it this way, instead of simply rushing to exhaust your savings to do a wedding, buy a car, or pay for education, taking out a loan will be a lot more flexible. To make the loan application process easy and enjoy better terms and conditions, make sure to apply through Lendela. This is a lender comparison site that is dedicated to making loan applications easy and fast.
When it comes to managing your finances, you do not require an advanced education background to get it right. The tips we have highlighted in this post are all you need. Remember that planning for tomorrow starts today. So, grasp all aspects of your finances, get a loan through Lendela and repay it on time, and protect your wealth.