Over a period of time, our income grows but it is necessary that we all live within our means. Make sure that you donâ€™t buy something that you cannot afford and avoid getting something in credit. Be happy with what you have and donâ€™t compare it with others. Some general advices that are given to people are start saving from the time you get your first paycheck. Make all the mortgage payment as early as possible. Set a retirement account as soon as you begin your work career. You can give your money on compound interest and set a household budget and just stick to it. The more you sacrifice the more you can save. However, treating yourself once a while by splurging your lifestyle is very important. Whenever, you receive your credit bill just pay it off immediately. Make better buying choice and learn how to live frugally. This way you can grow your income with years. Make additional payments in later years of life.
1. Save whatever you can:
Always have a cushion to make right decisions in life like leaving a bad job, deciding on right medical facilities, risking your financial position and many other things. This way you can prevent ending up eating lots of money and use of savings efficiently. Aim to save for your retirement, childrenâ€™s college, new house to stop paying rent.
2. Figure out your financial goal:
The most important thing that you need to do is figure out your financial goals. Ask yourself when you want to retire and with how many money. Save a lot of money to survive in the next 20 years so that you can send your child to the best college. You just need to determine your own life goals and plan your finance accordingly.
3. Keep a budget for your savings:
After fixing your overall goal, you need to figure how you can reach there. Many people spend whatever they feel like spending and then save the remaining amount. The very first step to achieve your financial goal is to flip the whole equation. You need to first evaluate how much you need to save every month to achieve your financial goals and then spend the remaining amount accordingly. Take help of calculators to exactly out how much you need to save every month for achieving your financial goal. It is easy to set a minimum goal but if you want to save more money and are wondering how to strike balance between your future saving and enjoy your present life as well. If you are such a person then give yourself pat on your back. You need to split money evenly between your savings and luxurious spending. Whenever you get bonus at work or a raise, put a part of money into your savings and spend the remaining money at anything that your heart desires.
4. Maintain separate accounts and automate it:
After knowing exactly how much you need to save, keep your egg safe at nest and separate it from your spending money. Be careful with your plans and donâ€™t eat your own egg without even realizing anything. The best way to go about this is to maintain separate bank accounts. Set one account for savings and the other for everything else that you do. After having different accounts, you just need to set up your pay cheques to deposit money into your account automatically.
5. Set financial security for yourself:
If you donâ€™t have job, set financial security for yourself. It is important but still people donâ€™t follow this rule. In case you get a job, the employer may give you deferred compensation options. This individual may not be licensed in various financial options so they cannot advise you in legal terms. You should choose your own way of retirement as you can then hop your employers.
6. Give more importance to your hourly earnings:
Your annual earning is not important. A person who makes $50,000 annually at $ 500 per hour is considered to be more important. This person can lead a meaningful life than the one who makes $1,00,000 at $50 in a hour. This concept helps you to understand who is rich and who is not. Someone may not live a rich life due to their wealth and material possession. Someone lives an enriched life because they have freedom to spend their time in their own way.
7. Know approximate monthly cost of lifestyle:
You should know the approximate cost of lifestyle that you desire to achieve. You may work on monthly basis if you get paid on monthly basis. There are threefold benefits of this is that it provides you vivid mental picture of future that looks like your financial goals are realized and this may also keep you motivated. This helps you to create financial targets and assists you to develop your monthly budget. It serves your vision and helps you to steer through tough life decisions and it impacts your finance in a bigger way. As you gain more experience and education, you can make revisions in your monthly price tag and it should not be much.
8. Understand implications of money:
You need to understand that it takes money to make money. The more money you have, the lesser efforts, knowledge and specialization to acquire wealth. The more cash you have, the lesser is the rate at which money grows and you can reach your financial goals within a reasonable time.
9. All debts are not the same:
It is important to understand that all debts are not the same. There is a huge difference between revolving debt and installment debt. The revolving debts are offered at a higher rate of interest. It is very important to know differences between all types of debt. The asset debt often gets appreciates in value and produces income that can cover almost or part of debt servicing. Many tax incentives are also linked with the debt and it makes debt more attractive. However, same is not the case for consumption debt and it excludes collectibles like TV, cars and many other things.
10. Pay attention to credit score:
You should establish your credit score as soon as possible and the best way is to get credit card. A good score helps you to make money cheap while applying for loans. Avoid making late payments, bankruptcy or foreclosures.