In today’s world, one of the most important things a younger person can do is start to learn how to manage their money wisely. It is too easy to get buried in debt, and it seems almost impossible to get out of it. By checking out these 6 tips, you can get yourself on the right track to financial peace of mind.
1. Create a budget, and stick to it!
You will see this tip on any blog you read, and there is a good reason for that. Make sure you actually write down your budget, and prioritize everything. This may help you keep from dipping into your bill money or your savings account. Another tip you can try is to over budget if you can. This way, if something unexpected happens, you wont have to go over your budget, but if there are no surprises, then you have extra money left over. For more tips on budgeting, check out MintLife Blog.
2. If you don’t have a savings account, then start one.
Its very important to have a savings account for emergencies. I was always taught to try and save up at least 3 months worth of pay, just in case you lose your job, or have to take time off. I understand its hard to just stash that much money away all at once, but a little money here and there can really add up. One easy way to build your savings without even noticing is to have an automatic transfer set up from your checking to your savings. If you have direct deposit, then you can have, for example, $25.00 switched out automatically, and you hardly notice. For more information about savings accounts, click here.
3. Beware of Credit!
Credit is such a powerful tool to use in the financial world and can really help you when purchasing a new vehicle or home. It can also be fatal to your finances. According to research done by Debt.org, the average credit card debt of young people between the ages 18-34 ranged from $3000-$5200. In today’s world, they make it too easy for people to get a credit card or some kind of “buy now, pay later” deal. While it may sound like a good idea at the time, it is what really hurts people years down the road. People think they have all the money in the world and swipe that card like they will never have to pay it back when, in reality, they do have to pay it all back, plus interest. If you do use credit, make sure you have the cash to back it up.
4. Live within your means.
Try to keep your cost of living below how much money you actually make. Suze Orman, a financial guru also suggests cutting your spending by 10%. By doing this, you will end up with extra money at the end of the month even after all your bills have been paid. This also means that if you get a promotion and a raise at your job you should try to continue to live the way you have been before. This means you will have even more money to save at the end of the month. If you unnecessarily increase your cost of living and you lose your promotion and raise, you just might not be able to afford everything anymore. So its best to just play it safe.
5. Invest in your retirement.
If you start putting money into a 401k or an IRA while you are still in your 20′s, you will have contributed more money overall than you would have if you started in your 30′s or 40′s. This also means your retirement will have had more time to collect interest and make you more money. If you want to learn some good tips on how much you should contribute, check out this link.
6. Invest in health insurance.
Health insurance is a must. If you don’t get it through your employer, you should try and get it from somewhere else. According to a survey done by The Common Wealth Fund, nearly 2 out of 5 adults between the ages of 19-29 where without health insurance for all of 2011. Sixty percent of those claimed to have not gotten needed healthcare because of their inability to pay, and half of them reported problems paying medical debt (see more atThe Commonwealth Fund website). If you have some sort of coverage, you can drastically reduce the cost of medical bills and keep yourself out of debt in the unfortunate event that you need to seek medical care.
Keep these 6 money tips in mind when managing your finances. You will be a lot better off in the long run if you take control now, rather than being at the mercy of debt collectors!