Learning how to navigate the financial world can be an overwhelming and daunting experience - even for adults that have a lot of experience dealing with debts and income. However, it's important to remember that how you handle your cash flow can have a huge impact on your happiness, your stress levels, and your ability to cope with day-to-day life.
With a little bit of smart planning and a few essential lessons, you should be able to start developing the skills you need to make the most of money management and keep your finances under control. Here, we'll take a look at 6 lessons that should inform all of your cash-related decisions.
Lesson 1: Live Within Your Means
The wealthiest people out there didn't become rich because they spent everything they earned each month. In fact, most of the self-made business owners you read about online are careful about spending their income. If you want to make sure that you have enough money for fancy clothes and an expensive car, then you need to know how to save.
Begin by using 90% of your income for life, and another 10% for saving. You could have that cash automatically deducted from your paycheck and placed into a retirement savings account if that makes things easier for you.
Lesson 2: Think Carefully About Financial Goals
Ultimately, if you want to accomplish great things with your cash, then you need to know what you want to achieve in the long-term with your finances. Write out some of your goals, and think carefully about how you can make them a reality. Remember, you're less likely to achieve your goals if you don't have a concrete plan to get from point A to point B.
The more you have your ambitions and motivations in mind, the more likely you are to avoid spending money frivolously when you should be saving.
Lesson 3: Actually Stick to Your Budget
While many of us know how valuable a budget can be when it comes to controlling spending, few people actually stick to the rules and guidelines they set out for themselves. If you're putting a budget in place, it's not enough to simply tell yourself that you need to spend less, you have to stick to limitations you have.
A good way to improve your chances of sticking to your budget is to be realistic from step one. Make sure that you don't place restrictions on yourself that are going to push you into falling off the bandwagon. You don't have to cut frivolous spending down to 0 straight away, cut down into small chunks instead.
Lesson 4: Approach Debt with Caution
Let's face it, most of us are going to end up in debt for some reason or another. You might find that you take on debt because you end up over-spending on your credit cards, or you might just decide to take out a home loan to buy property for you and your family. No matter why you get into debt, make sure that you only ever borrow from reputable lenders who can trust to give you a good deal.
At the same time, remember that you should only ever get into debt within your means. This means that you need to make sure that you can continue to pay off your debt, even if you're thrown a curve ball in life.
Lesson 5: Have a Good Emergency Fund
An emergency fund can be an important way to boost the health of your finances. If you don't have one of these safety blankets in place, then you're more likely to end up relying on credit cards and savings to get you through sticky situations.
A good idea is to have an emergency fund in place that accounts for about 3 months of your average income. This will help you to ensure that you're always prepared if something happens that you can't control. For instance, if you lost your job and you needed to take some time out to find another career. If you're saving a lot of money back, then you might want to consider investing instead.
Lesson 6: Always Plan for the Future
Finally, it's easy to simply ignore your retirement and tell yourself that you'll "cross that bridge when you come to it", particularly during your early years. However, the truth is that you should have a plan in place as quickly as possible if you want the best chances of a happy life as you get older.
The faster you can contribute to your nest egg, the more comfort you'll get when you want to stop working and start enjoying your golden years. Make sure you look into things like matched contributions too, to improve your savings.
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