I was having a conversation with a friend the other day about personal finance. I take for granted, having spent so much time in the last couple years reading personal finance blogs and financial books, how some of the stuff we do has become commonplace. Stuff like budgets, living within our means, paying down debt, and investing in our future.
But after speaking to my friend, I realize how many people aren’t really taking care of themselves financially, and setting themselves up for a bleak financial future.
I have another friend in his 60′s who knows all too well where not setting yourself up with good financial habits early on can lead you. As someone who is approaching retirement age, he has little to no retirement savings, and was recently laid off from a long-time job, making him scramble to find work.
I was headed down a bleak financial road myself, up until several years ago when I had a pretty big wake up call, which led me to take action and start making better decisions.
So the following info may seem very redundant to frequent readers of this blog, but sometimes that information needs to be pounded into the heads of those still not taking very good financial care of themselves. And the younger you are reading this, the better off you will be!
You Need a Budget
I don’t care if you’re making a million dollars or 25,000 per year. You need to know where your money is going. I’m sure many people can come up with an argument of why they don’t want or need a budget, and how they keep track of everything in their head, or have less money going out than coming in, but I don’t agree. I just don’t. I think it’s the first step in becoming more money conscious of the green stuff you work so hard for. Even if you spend less than you make, you can probably better utilize your funds than you currently are.
I was one of those people who thought I could just roll along without one, then I was laid off and started freelancing, and earning much less than I was making as a full time employee. I blew through too much of my savings because I was unconsciously spending.
You Need To Live Below Your Means
Again, seems obvious, but so many people are not doing this. You know who you are. Look, I understand that it may not be fair that your friends will be able to go out to eat more than you, or travel more, or buy more clothes, but money doesn’t feel sorry for you. Money just is. And you either keep it, or you spend it. This is why having a budget is so important. Most people don’t even realize where their money is going, or how much they spend on groceries or going out to eat. There is no easy way around this. If you want to have a secure financial future, you need to live below your means.
Quit Charging Your Life Away & Pay Off Your Debt
There is a time and a place to utilize plastic to your benefit. I use credit cards to travel hack, but only because I can for sure pay off the balance each month. If you are using plastic because you don’t have money in the bank, then you are seriously jeopardizing your financial future. Get help with why you are spending when you don’t have the cash to pay for something. Then begin making debt repayment a priority. Find ways to earn extra income and reduce expenses. The faster you can pay off your debt, the better.
Save and Invest
Once you’ve gotten your spending plan in place and if necessary paying down any debt, it’s time to get serious and come up with a savings plan for yourself. I always recommend an emergency fund first (the amount varies based on an individual’s situation), then various necessary short term savings buckets (like saving for a car, house, vacation), and of course, retirement. Investing is another blog post entirely, and can sometimes be overwhelming, so start small, and use online tools like Stocks in Value to help with investing.
Do you have all these tools in place currently?
Image courtesy of duron123 / FreeDigitalPhotos.net
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