My blog focuses on Financial Literacy/Money. Wealth building is something everyone wants to do, but it’s a thing that’s easier said than done. The following contributed post is entitled, The Secrets to Building Wealth: 3 Habits of Highly Successful Savers.
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Building wealth isn’t just about earning the top salary or winning the lottery; it’s also about creating smart financial habits that stand the test of time. For highly successful savers, growing wealth is the result of being disciplined, having a plan in place, and being consistent.
By adopting these three habits, you can take charge of your finances and set yourself up for long-term financial success.
Prioritise Saving With a Purpose
The best savers don’t just save money; they have goals in mind when they do it. Whether it is for retirement, a new home, or an emergency fund, every bit of money saved has a designated purpose. To start with, create a budget that prioritises saving and identify areas where you can cut back on unnecessary expenses and redirect those funds toward your goals. When you automate your savings, it is a great way for you to stay on track. Set up a direct deposit from your paycheck into a high-yield savings account or investment portfolio. Having goals in mind will not only provide you motivation but make it easier to measure your progress. For example, saving for a six-month emergency fund can be broken down into smaller chunks, making it easier to achieve.
Reduce Debt Strategically
Debt is a huge barrier when it comes to growing wealth. The interest on high credit card balances or personal loans can quickly drain your income and limit your ability to save or invest. That is why successful savers focus on reducing debt as fast as they can and as strategically as possible. One effective strategy for debt consolidation is using a financial tool that combines multiple debts into a single loan, often with a lower interest rate and more manageable monthly payments. Consolidation simplifies your finances and can save you money on interest in the long run. If you are struggling to juggle multiple payments or want to explore ways to get your debt gone faster, consider looking into debt consolidation. It’s a great step toward financial freedom, giving you more room to grow your wealth.
Invest Wisely For Long-Term Growth
Saving is important and should be considered essential, but investing is what truly builds wealth. Successful savers understand the importance of putting their money to work for them by making smart investments. The key is to start as early as possible and be consistent; even with just small amounts, compound interest can turn modest contributions into big wealth over time. Try to diversify your portfolio as much as possible by including a mix of stocks, funds, and other assets that align with your risk tolerance and financial goals. Look at your investments on a regular basis and adjust them as needed to ensure that they always meet your goals. It might be a good idea to seek advice from a financial advisor, as they can help you make the right decisions and maximise your returns.
Conclusion
Building wealth is not an overnight achievement; it is something that requires commitment and smart financial habits. By prioritizing saving, lowering your debt through tools like debt consolidation, and investing for long-term growth, you can start to build a financial foundation that is going to grow your financial wealth.
My blog focuses on Financial Literacy/Money. Money isn’t just something to spend. It is also something to use to build wealth. There are aggressive ways to do that, in addition to defensive strategies. The following contributed post is entitled, Protecting Your Finances: Smart Strategies For Long-Term Security.
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Financial security is essential for leading a stable life. Whether you’re saving for the future, managing debts, or dealing with unexpected expenses, it’s crucial to protect your finances from unforeseen risks and changes. By taking proactive steps, you can safeguard your money and avoid financial setbacks.
Here are some effective ways to protect your finances:
Build an Emergency Fund
One of the most effective strategies for protecting your finances is to establish an emergency fund. This fund serves as your financial safety net, ensuring you have the necessary resources to cover unexpected expenses such as medical bills, job loss, or car repairs. A good rule of thumb is to save three to six months’ worth of living expenses in a high-yield savings account that is easily accessible. Having an emergency fund provides the flexibility to handle life’s surprises without incurring debt or jeopardizing your long-term savings. This financial cushion is especially valuable during times of economic uncertainty or major life transitions.
Invest in Insurance
Insurance is another vital way to protect your finances from significant risks. Whether it’s home insurance, health insurance, auto insurance, or life insurance, having the right coverage can shield you from large, unexpected costs. Without insurance, you could face overwhelming bills that might drain your savings and lead to financial hardship. For instance, health insurance can prevent you from being financially burdened by medical expenses, while life insurance ensures your family is financially protected in the event of your passing. Similarly, auto and home insurance protect your property and vehicles from theft, damage, or accidents, thereby reducing the financial impact of unforeseen circumstances.
Seek Legal Assistance When Needed
Legal challenges can pose significant risks to your financial health, especially in cases of personal injury disputes or accidents. For example, if you’ve been involved in an accident and are facing medical bills, lost wages, or long-term care expenses, it is important for you to consult with a personal injury lawyer. A lawyer can help you navigate the legal process, negotiate settlements, and ensure that you receive the compensation you deserve. This will help alleviate the financial burden on you and your family.
Legal issues can also arise in other areas, such as contract disputes, divorce, or business-related matters. Having legal support when needed can protect your finances and ensure that your interests are protected.
Manage Debt Wisely
Another important strategy for protecting your finances is to manage your debt. High-interest debts, such as credit card balances or payday loans, can quickly spiral out of control and hinder your financial progress. Prioritizing the repayment of high-interest debts and avoiding new debt is essential. If you are dealing with multiple debts, consider consolidating them into one single payment with a lower interest rate, or seek professional financial advice. Staying on top of your debt and managing it properly is crucial for protecting your financial future and preventing financial distress.
Protecting your finances is about being proactive and taking the right steps to safeguard yourself against unexpected expenses and legal challenges. Building an emergency fund and investing in insurance can help you manage your finances and secure your financial future.
My blog focuses heavily on Money/Financial Literacy. Money is something a lot of people struggle with in any financial environment. If you want to win with it, there are a couple of key things you must focus on. The following contributed post is entitled, 7 Simple Ways to Improve Your Finances This Year.
Life can have its ups and downs. But nothing beats feeling like you’re on track and have it all under control. As much as we might all want this to be the case at all times, that doesn’t always happen. We get thrown curveballs from time to time and it often means we need to change direction or try and get things back in line. The problem is, when that happens, we can tend to feel stressed out and a little stuck. So we don’t always know what we need to do to change things. As much as this can apply to just about any area of your life, it always feels so consuming when it affects your finances.
We all need money to live. We also need money in order to finance our goals and create the lifestyles we want – no matter what they are. So, when we find ourselves in a less-than-perfect financial situation, it can feel really stressful. When this happens, the best thing we can do is take control and make the tweaks that will take us in the right direction.
If you have noticed that your finances have taken a tumble recently and you’d like to get them back on track, you’ve come to the right place. In this blog post, we’re going to run through seven things you can do right now to get your finances back on track.
1. Start Tracking
First of all, the most important thing for you to do here is to become more financially aware of where you’re at. If you’re not tracking your finances, you’ll find that it’s hard for you to make any adjustments or improvements. So here, you’ll want to begin by keeping track of all your income and expenditure. From here, you can then make the right decisions to support your finances going forward.
2. Create a Budget
When you have more visibility around what money is coming in and what’s going out, you can then start to budget a little more accurately. Having a budget is a great way to funnel and guide your money in the right direction. It also helps you to have more control over your money too.
3. Pay Down Debts
When you’re more aware of where you are financially, one of the first things you might want to consider doing is paying down your debts. It doesn’t matter how much you owe and what the debt payments are for, you’re likely to feel more on track as you start to pay them down and get yourself feeling more secure again.
4. Set a Savings Goal
Next up, as you’re starting to pay down debts, you’ll also want to make sure that you’re looking at what you can save. When you have savings behind you, it can feel so much more reassuring. Then, if there’s ever an issue again in the future, you know that you have money to fall back on. Here, you can consider setting a savings goal to work toward. Having a target might make you feel more on track and accomplished when you reach it.
5. Buy a Property
As you start to get your finances back on track, you may want to consider buying a property. This might be your first property ownership experience or it could be that you want to move to a more suitable family home. Either way, you’ll want to get organized here. Not only do you need to organize your finances, but you’ll want to make sure that you have a civil attorney in place too. That way, you can be ready to make your purchase but also budget out all the legal costs that go along with it too.
6. Look into Investments
As things starts to get a little better and you have money in savings, the next port of call is to consider investments too. Savings rates will only do so well for your money – so considering investing in stocks, bonds, and shares might just help you to get a better return.
7. Increase Your Income
Finally, you may want to think about the ways you can increase your income here too. Because when you’ve managed to get your finances back on track, you may want to make sure that they stay there. Only having one income can put you at risk and if you do start to create some investments, that will certainly help. However, from there, you may also want to consider some side hustle ideas that will help you to add more money into the pot and have additional income streams to rely on.
My blog focuses on Financial Literacy/Money. Like politics and religion, personal finance can be and often is a controversial topic as it touches all of us. Some people do better with money than others and there are reasons for that. The following contributed post is entitled, Why Do So Many People Struggle With Money? The Hidden Traps Explained.
Have you ever wondered why so many people struggle with money? Why is it, for instance, that more than half of people living in the US are doing so paycheck-to-paycheck, without being able to build any savings?
It’s a deep question. But part of it comes down to hidden traps. People simply don’t understand money enough to manage it effectively.
Fortunately, this post is here to help. It explores the real reasons for money struggles and how they emerge. Here’s what you need to know:
No Savings
The first trap is the issue of savings. These are necessary when unexpected expenses arise, but many people believe they can live without them, only to discover later that they can’t.
Poor saving skills are often what leads to debt spirals getting out of control. Cash runs out but bills need to be paid, so people take out credit to cover the difference. Interest rates mount and then individuals become dependent on debt. Eventually, it becomes a rolling theme, costing more every month.
According to the CEO of National Debt Relief, Alex Kleyner, mastering credit management is essential. Debt can prevent people from achieving their financial goals, he says, and even experiencing a sense of freedom in their lives.
Behavioral Issues
Another common problem is behavioral issues. Many people get into trouble simply because they approach money in the wrong way.
One problem is the so-called “present bias.” This is the idea that what happens now matters infinitely more than what happens in the future. It’s a tendency to view short-term rewards as being superior to long-term gains, reducing the propensity to save.
Another serious issue is the idea of “mental accounting.” Here, some people compartmentalize their spending, telling themselves that it’s okay to put all their money into entertainment because it’s fun.
The fear of missing out (FOMO) is another massive reason people struggle with money. Many individuals believe they have to keep up with the lifestyles of ultra-rich and successful individuals, including buying nice cars and jetting off all over the world.
Of course, the reality is that for most productive people, going away is something that happens once or twice a year. It’s not a weekly event.
Comparison culture on social media also plays a role. People want to play the status game, and that often involves spending vast quantities of money on conspicuous consumption, like trips to Flannels.
Of course, it’s not just a matter of personal responsibility. The economic system as a whole creates issues for people.
The cost of living, for instance, can rise dramatically in some cities, often over the course of a few months. Added demand can put pressure on housing stock and local resources, putting prices up.
Stagnant wages are also a factor. While wealthy people keep adding to their cash hoards, ordinary citizens are struggling to get by. Globalization, immigration, and unfriendly labor practices are all issues.
Limited Financial Literacy
Then there’s the problem of limited financial literacy. Many people simply don’t understand money and how it works.
To be fair, the number of people who really know their finances well is limited. That’s because it is a tricky topic, especially when you start including things like the stock market.
However, many individuals weren’t taught simple money management and accounting skills in school, setting them up for a life of challenges. For example, in today’s culture, we see a massive reliance on credit. People stick payments on their cards, shifting payments off into the future, neglecting to consider rates and fees. These practices can then lead to more debt that becomes hard to escape.
Hardly any children get an education in investing either. Then, when they become adults, they wind up making poor financial choices because they don’t understand how the underlying market works.
Then there’s the absence of goal-setting, also critical for financial planning. Overspending is much easier when all that matters is right now.
Emotional Spending
Finally, many people spend money for emotional reasons, not practical ones. Shoppers might use retail therapy to splurge on items they don’t really need to cope with stress, boredom, or other uncomfortable emotions they might be experiencing.
Financial avoidance is another common phenomenon. Here, individuals deliberately avoid looking at their bank accounts because they worry about what they might show. Overdue bills cause them stress, so forgetting about their overdraft often seems like the best short-term tactic.
My blog focuses on Financial Literacy/Money. Some of the biggest financial decisions any of us will ever make involve retirement. To properly plan for retirement, one has to plan early and wisely. The following contributed post is entitled, The Best High Yield Investments To Save For Retirement.
How long do you have for retirement? Ideally, you’re reading this post with a good few decades left on the clock. If your retirement date is a year around the corner, I’m afraid you’ve left things a little late! Saving for retirement is something you should do many years in advance of this moment. It gives you plenty of decades to prepare your funds and ensure you have more than enough money to live comfortably without a job.
Unbelievably, most people don’t know how to save for their retirement. You may set a budget and focus on spending less money to have more in your savings, but you need to learn what to do with your finances. Popping your cash in standard savings accounts won’t help – you need high-yield investments with long-term gains that earn lots of money across the years. When the time comes, you can cash in on these investments and generate loads of money to fund your retirement.
What sort of things should you invest in for high-yield gains? Check out two of the best options below:
Real Estate
Real estate investments are always the best for long-term profits. The property market trends upwards, meaning 99% of homes bought today will be worth more in a few decades. It’s a tale as old as time, so getting on the property ladder immediately helps you save for retirement.
Furthermore, you should consider alternative ways of incorporating real estate investments into your life. Aby Galsky – the CEO of a prestigious real estate investment firm – suggests trying private equity real estate funds. He mentions you can invest money into these funds with other investors, and the funds then take this money and invest directly in real estate assets. It’s a particularly smart choice for higher returns if you want to commit capital for long durations – which is precisely the goal of saving for retirement.
So, you have two approaches to real estate: go at it directly and buy properties or invest in real estate investment funds. The latter requires less upfront investment, while the former will generate larger overall returns.
Precious Metals
The next best option is to invest in some precious metals like gold or silver. Historically, these investments are used to hedge against inflation and economic uncertainty. They present steady gains over long periods, marking them as wonderful retirement investments.
Just look at the gold price per ounce over the last 30 years. In 1994, you were getting under $500 per ounce for gold. Fast forward to 2024, and it’s now at just over $2,700 per ounce. That’s a remarkable gain, and evidence suggests it could continue that way in the next 30 years.
So, a 30-year-old saving for retirement could invest in gold now and see it quintuple in value by the time their retirement age comes around. It’s a simple and steady investment with much higher yields than standard savings accounts.
Of course, make sure you take advantage of tax-relief retirement accounts alongside these high-yield investments. You need a 401(k) or a Roth IRA to save more money over the years. The sooner you prepare for retirement, the longer you leave your investments and savings to do the work!
A key focus of my blog is Financial Literacy/Money. A person’s financial results is often the end result of their mindset and decision making. Thus, if you want to change your financial outcomes, you have to adjust you mindset. The following guest post is entitled, Financial Flourish: Revolutionize Your Money Mindset for Lifelong Prosperity.
Financial Flourish: Revolutionize Your Money Mindset for Lifelong Prosperity
Navigating the path to financial success demands more than just practical strategies; it requires a fundamental shift in your money mindset. This guide from Big Words offers insightful approaches to reshape your financial perspectives, equipping you with the tools for a richer, more rewarding life.
Embrace Forgiveness for Past Mistakes
Begin your journey by confronting and forgiving past financial missteps. It’s a common part of everyone’s financial narrative to encounter setbacks. Releasing yourself from the shackles of guilt and self-reproach opens up a new realm of mental clarity, enabling a forward-focused mindset. Understand that these experiences are not just mistakes but valuable lessons. Reflect on what these setbacks have taught you about risk, planning, and resilience. Use these insights as stepping stones to build a stronger financial foundation. Recognizing the value in these experiences transforms them from regrets into valuable life lessons. This mindset shift is crucial for making more informed and confident financial decisions in the future.
Explore New Income Avenues by Starting a Business
Diversifying your income is a strategic move to ensure financial stability and starting a business can be an effective way to achieve this. A business can serve as an additional revenue stream, separate from your primary income, providing a safety net during uncertain economic times. This venture could be based on your passion, skills or a unique idea that meets a market need. It not only has the potential for financial growth but also offers the opportunity to learn new skills, build networks, and even create jobs. However, it’s important to remember that starting a business requires commitment, research, and planning to ensure its sustainability and success.
Forming an LLC (limited liability company) provides the benefits of personal liability protection, potential tax advantages, and increased credibility with customers and partners. You can register an LLC in Michigan through ZenBusiness or hire an attorney to complete this task.
Avoid Comparison
The trap of financial comparison can be a significant barrier to personal growth. Understand that each financial journey is unique; your path is not meant to mirror anyone else’s. Dwelling on how others manage their finances or their apparent success can lead to a distorted view of your own achievements and goals.
Instead, focus on setting personal financial targets that align with your values and long-term aspirations. Celebrate your milestones, no matter how small, as each step forward is a progression towards your financial independence. Cultivating a mindset that appreciates personal progress rather than external comparisons is essential. It’s about understanding that financial well-being is not a race, but a personal journey of growth, learning, and adaptation. Embracing this perspective will not only bring peace of mind but also enable you to make decisions that are right for your situation, free from the influence of external benchmarks.
Prioritize Efficient Document Management
Effective management of financial documents is a critical aspect of savvy financial management, transcending mere clerical work. The first step in this process is to digitize key documents, ensuring they are stored in universally accessible formats like PDFs. This strategy not only puts vital information at your fingertips for tax filings, loan applications, or personal financial assessments but also enables you to access your documents from anywhere, enhancing flexibility and convenience. If you need to separate a PDF, try using a PDF splitter online.
With a well-structured system, you gain a clearer insight into your financial health, fostering improved decision-making. Regular engagement with your financial documents, through updates and reviews, keeps you deeply connected to your financial situation. It allows you to observe trends, pinpoint areas needing improvement, and implement necessary adjustments. This hands-on approach to document management significantly alleviates the stress and uncertainty often linked with financial planning and analysis. Ultimately, it’s about crafting a system that aligns with your needs, one that streamlines and clarifies the complexities of personal finance.
Cultivate Good Money Habits
The foundation of financial stability and growth lies in the daily habits that shape your financial life. Start with the basics: budgeting, saving, and tracking your expenses. Integrating these practices into your daily routine might seem trivial, but their cumulative effect over time can be transformative. Budgeting helps in understanding and managing your spending patterns, while saving instills discipline and provides a buffer for unexpected expenses or investment opportunities. Tracking expenses, on the other hand, offers insights into your spending behaviors, helping you to make more informed choices. Expense tracking apps like Wallet and FinArt can be invaluable.
The key is consistency and commitment. Make these practices a regular part of your life, and soon, they will become second nature. It’s about taking small, manageable steps towards a larger goal, and over time, these steps can lead to significant improvements in your financial health and well-being.
Use Credit Wisely
Credit, when managed responsibly, can be a valuable asset in your financial toolkit. It’s crucial to understand the terms and conditions of your credit accounts and to use them to your advantage. A strong credit score opens doors to various financial opportunities, including better loan terms and interest rates.
Practice disciplined credit usage by avoiding excessive debt and paying bills on time. Regular monitoring of your credit report is also essential to ensure accuracy and to identify any areas for improvement. This vigilance helps in maintaining a healthy financial profile and in making informed decisions about using credit as a strategic tool. Managing credit responsibly is not just about avoiding debt; it’s about understanding how to use credit as a means to build and maintain your financial health and leverage it in times of need or opportunity.
Master the Art of Wise Investments
Investing is a vital component of wealth building, but it requires careful planning and education. Start by acquainting yourself with different investment options, each with its own risk and reward profile. Diversification is key to managing risk; it involves spreading your investments across various asset classes to mitigate potential losses. Don’t hesitate to seek advice from financial experts; their insights can be invaluable in navigating the complexities of the investment world.
Keep in mind that investing is a long-term strategy. Patience and consistency are crucial, as is staying informed about market trends and economic factors that may impact your investments. Developing an investment strategy that aligns with your financial goals and risk tolerance can significantly contribute to your overall financial security and growth. Remember, wise investing is not just about choosing the right assets; it’s about making informed, strategic decisions that align with your overall financial plan.
Shifting your money mindset is an integral part of achieving financial success. This journey requires patience, dedication, and a commitment to continuous learning and adaptation. By practicing forgiveness for past mistakes, seeking new income opportunities through starting a business, avoiding detrimental comparisons, managing your documents efficiently, cultivating healthy financial habits, using credit judiciously, and investing wisely, you set the stage for a financially stable and prosperous life. Each step, each decision, is an opportunity to strengthen your financial acumen and move closer to your goals. The path to financial empowerment is in your hands; these principles serve as a guide to help you navigate it with confidence and clarity.
About the Author
This blog post was developed by Timothy Grayson. Financial Wellness Lab provides individuals with trusted online resources to help them get their finances in order and improve their overall wellbeing. Whether you are struggling to make ends meet or simply want to learn more about personal finance, the Financial Wellness Lab has something for you.
A key focus of my blog is Financial Literacy/Money. A major aspect of our personal finances to manage is debt. The optimal situation is planning for the servicing of personal or business debt. Managing sudden debt can be much trickier. The following contributed post is entitled, Dealing With The Specter Of Sudden Debt.
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If you have suddenly found yourself facing sudden debt, whether due to an unexpected expense or other kinds of emergency situations, it can be genuinely scary. However, there are always options to deal with it, so you should avoid letting that fear paralyze you. Here, we’re going to look at the steps you can start immediately taking to manage it.
The very first thing you should be doing is looking for the room in your budget that allows you to start dedicating more money towards putting off your debts. If you haven’t created a household budget, now is the time to do so, making sure that you account for frequent non-essential expenses. These are what you should start cutting down on first, including canceling unnecessary subscriptions, but you can look at ways to get your groceries for cheaper, too, such as by meal planning.
Increase your earnings
On the other hand, you should look at what you might be able to do to bring more money into the house. This can include finding a side hustle, but it can also include things like making money using your home, such as by leasing out a room or renting out the space around your property. If you have assets or skills that can benefit others, then you should be thinking about how to market them.
Contact your creditors
If you’re seriously concerned about your ability to pay back your debt in the time you’re given, then you might want to contact your creditor, first and foremost. Most creditors want to make sure that they can get paid the entirety of their money back, and often, the most reliable way to do this is by agreeing to a new repayment schedule with you. It doesn’t always work, but it is definitely a solution worth considering.
Move your debt
If you have sudden, serious debt, and the creditor offers no way to help you manage it, then moving it might be the better option instead. For instance, if you have to pay immediately, you can get some breathing room by opting for installment loans, instead. If you have multiple debts, you can consider consolidating them with one credit, especially if they are able to decrease the interest rates while making your debt more manageable.
Ready an emergency fund for the next time
Although it might not help you deal with immediate debt, one of the best ways to prevent this kind of anxiety from arising again in the future is to work to ensure that you have a cash reserve that you can rely on when you need it. Building an emergency fund can help you in precisely the situations like these.
There are always solutions and always options to mitigate your troubles, keep that in mind. Debt can be scary, but it is manageable. What matters is that you start taking steps to manage it right this second. Don’t put it off, find the option that works best for you.
A key focus of my blog is Financial Literacy/Money. Financial Literacy is critical. Understanding your money, where it goes and how to maximize can impact your overall quality of life. The following guest post is entitled, Financial Literacy: The Importance of Knowing Your Money.
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Money is an important aspect of our daily lives. While it’s not the most important part of our lives, it affects everything we do. For example, we go to work every day because we need money to pay for housing, water, food, and entertainment. This is perhaps the most significant reason financial literacy is so important — money touches every area of our lives.
Why is Financial Literacy Important?
Financial literacy gives us the knowledge to manage our money; it can tell us when we’re overspending and how to save. Without it, we would be more likely to make poor financial decisions affecting our overall quality of life and health. But unfortunately, many people don’t have enough money in their retirement accounts and can’t afford basic healthcare costs.
Many people don’t have financial literacy; they don’t know how to save money or track spending, and they often find themselves in debt because they don’t realize the potential consequences. Here are a few reasons why financial literacy is important:
Education
Attending university is an expense most students aren’t ready for. They get loans without realizing how much it will cost them later in life. Unfortunately, many students drop out of college not because of their grades but because of financial pressures. Student success is defined by financials rather than actual academic achievement, and a student’s future relies on the opportunities available to them based on how much money they have.
After graduating from college, students are strapped for cash. Loan providers have a grace period to allow graduates to get a job before having to pay back their loans. However, even graduates with the highest grades still can’t find jobs, leaving many to wonder if the cost of college is even worth it anymore. While this largely depends on someone’s area of study, regardless of where they end up working, students still have massive debt they’ll have to work years to pay off.
This educational cost can put off other financial goals like saving for a house or even moving out of their parent’s homes, preventing them from achieving financial freedom until much later in life.
Help You Accomplish Goals
If you have goals, you need money to accomplish them. For example, you’ll need money to purchase healthy food if you want to lose weight. If you want to get a home loan, you need a down payment. If you want to renovate your rental property, you’ll probably need to hire a contractor to help you. Whatever your goal, you need money. Financial literacy means learning about various aspects of personal finance to help you learn how to manage your money to accomplish your goals faster.
Affects Families
Money affects a person’s life from birth until death, affecting everything in between. Families, marriages, children, and relationships are all impacted by finances. We live in a system where everything revolves around money, so while it can’t buy happiness, it’s necessary. Being wise about money can ensure stability for the future and reduce some of the stress in people’s lives.
Reduces Debt
Financial literacy educates everyone to reduce debt. Young people without proper financial education turn into irresponsible adults. These individuals don’t know anything about investing and can’t have enough money to purchase a home. Some live paycheck to paycheck even though they earn enough not to. Additionally, these individuals often take out loans for short-term goals, leaving themselves in debt they can’t pay off.
Individuals who learn about money early in life are less likely to take out unnecessary loans and more effectively manage their money to save for financial-related goals like retirement.
Prepare for Financial Crisis
Many people aren’t prepared for financial crises like job loss, emergency medical expenses, and recession. For example, many businesses went under recently because they weren’t prepared financially. Financial literacy helps individuals prepare for financial crises by helping them save money. Individuals with financial literacy have the knowledge to save more money. These individuals are more likely to have emergency savings accounts and separate bank accounts for various goals to help them prepare for a crisis.
Reduces Mistakes
Financial literacy can prevent money management mistakes. Innocent financial decisions can have long-term consequences. For example, getting a personal loan with a floating interest rate means rates can rise over time while investing in a particular type of retirement account means you can’t withdraw money even if you really need it. Financial literacy can help someone avoid making these mistakes to ensure they have a healthy financial future.
Ensure Retirement
At some point, we will all reach a point when we can no longer work, regardless of our jobs. We all look forward to retirement, but if you can’t save money now, you can’t retire. Most people need to save at least $1 million for retirement, depending on where they live. Without knowing how to invest in retirement accounts and other types of investments like gold or stocks and bonds, you simply can’t save enough for retirement. In addition, bank savings account rates don’t keep up with inflation, so if your money is sitting in a savings account at your local bank, you’ll never earn enough to retire.
Instead, you need retirement accounts that ensure your money grows over time. However, people without financial literacy don’t realize the importance of these accounts and how many different types there are.
Improving Financial Literacy
Unfortunately, our current education system doesn’t teach financial literacy, leaving more students confused than ever about managing their money. Most people learn through trial and error, but that leaves some open to the possibility of making a massive mistake. If you don’t have anyone to learn from, you can start improving your financial literacy by creating a budget and following it every month to start understanding your financial situation. First, compare your expenses to your income and determine how much you have left over for savings. Next, get your credit report and find ways to increase your score, such as paying down debt or opening a credit card.
Learning financial literacy may be something you have to do on your own, but it’s well worth the effort to prevent you from making a severe mistake that prevents you from reaching your goals.
Ashley Nielsen
Ashley Nielsen earned a B.S. degree in Business Administration Marketing at Point Loma Nazarene University. She is a freelance writer who loves to share knowledge about general business, marketing, lifestyle, wellness, and financial tips. During her free time, she enjoys being outside, staying active, reading a book, or diving deep into her favorite music.
“With a budget, you can predict your monthly spending habits and plan accordingly to cover your bills while having enough left over for existing debt payments or savings.”
A key focus of my blog is Financial Literacy/Money. Budgeting is a critical component when managing money. While it can sound arduous and restraining to some people, it can actually be a lot of fun and a very powerful tool. The following guest post is entitled, Budgeting 101: Tips for Creating a Realistic Budget.
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Building a budget is the most effective way to manage your finances and prevent overspending. With a budget, you can predict your monthly spending habits and plan accordingly to cover your bills while having enough left over for existing debt payments or savings. Unfortunately, many people don’t budget and spend more than they earn without realizing it. If you’ve ever looked at your bank account and been shocked to see how much you spent in a month, you need a budget that provides you with a clear action plan for spending your money every month. Here are a few tips for creating a realistic budget:
Know Your Monthly Income
Most people know their salaries or how much they earn per hour. However, they don’t look at their pay stubs to determine how much money they bring home after taxes. Your net income is crucial when building a budget because it tells you exactly how much money is deposited into your bank account each month, and knowing exactly what you bring home can help you determine how much money you have on hand.
If you have a W-2 job, finding this information should be easy. You should receive digital or paper pay stubs from your employer for each pay period that tells you your take-home pay. However, taxes aren’t taken from your income if you’re a freelancer or small business owner. Therefore, you may have to do additional math to determine how much you take home after taxes. You can talk to your accountant to determine your tax bracket and self-employment tax based on how much you make during the month.
Add Up Your Expenses
There are two types of expenses: fixed and variable. Your fixed expenses are what you spend money on every month, and the amount you spend doesn’t change. For example, your rent payments will stay the same for 12 months if you’ve signed a one-year lease. In contrast, your variable expenses are the costs that change from month to month, such as credit card payments, utility bills, and groceries.
Determining your fixed expenses is easy because you know exactly how much you spend every month. However, calculating your variable costs is much more challenging, especially if you use multiple credit and debit cards to pay for them. First, review your bank statements to find your variable costs and add them up for 12 months. This value is how much you spend on variable expenses per year. Then, to get your monthly costs, divide that number by 12 to give you an average monthly value.
Allocate
Once you know your monthly expenses, subtract them from your net income to see how much you have left over after paying all your bills. Then, allocate the remaining amount into wants and savings. You can have multiple different goals and accounts to help you separate your funds and send money back and forth between them when necessary. For example, you might have a savings account dedicated to emergencies or funding a large purchase and a retirement account.
Set Goals
When allocating your budget, setting realistic goals for yourself is crucial. First, consider the reason why you want to save money. Maybe you want to purchase a house within the next ten years or go back to school. Or perhaps you want to diversify your portfolio with a precious metals IRA. Whatever the case, you have money goals, and it’s essential to build your budget around them.
Track and Monitor Progress
After creating your budget, you should continue monitoring your progress monthly and determine whether you’re holding yourself accountable. It’s easy to start a reasonable budget and fall behind again, so you should dedicate time every so often to tracking your progress, including your income and expenses, to help you plan.
Tracking your progress can also enable you to re-evaluate your goals. As you get older, your money goals might change. For example, if you decide to start a family, your goals might change from saving money for a new car to saving for a house. As your goals change, you must make changes to your budget and review your spending to ensure your habits won’t get in the way of achieving those goals.
Review Expenses Regularly
When creating a budget, you should understand your expenses and where all your money goes. However, things change over time, so you may get new bills or pay off old debts, which will impact how much money you spend throughout the month. Therefore, plan to review your monthly expenses to determine improvement areas. For example, if you’ve noticed you’ve been spending a lot of money on eating out in the last few months, make a conscious effort to cook at home more often and check back to see how much money you’ve saved over time.
Try to lower any fixed expenses, such as car or payday loans. You can also find more affordable plans for internet and cable or various streaming services to help you save a few bucks every month and instead put that money towards your savings account.
Unfortunately, you can’t eliminate all of your expenses. However, you can make lifestyle changes, such as canceling unused subscriptions and memberships, to help you save more every month.
Increase Your Income
If you can’t reduce your expenses, you can increase your income. The easiest way to earn more money is to ask your boss for a raise. While this can be intimidating, it may also be necessary depending on the cost of living and your skillset. That said, you should only ask for a raise if you know you truly deserve it. Unfortunately, not everyone’s boss will give them a raise, so those individuals may have to search for other employment opportunities or work second jobs to increase their income.
Hold Yourself Accountable
A budget is just a list of numbers; it’s up to you to hold yourself accountable and stick to it. Managing your wants can help you save money over time, so review your bank statements to see if there are any categories where you’re overspending, such as entertainment or nights out on the town. Holding yourself accountable by ensuring you continue to review your budget, bills, and expenses every month will prevent unnecessary overspending while ensuring you can still put some of your paycheck toward saving for the future.
Megan Isola
Megan Isola holds a Bachelor of Science in Hospitality and a minor in Business Marketing from Cal State University Chico. She enjoys going to concerts, trying new restaurants, and hanging out with friends.
A key focus of my blog is Financial Literacy/Money. One of the keys to getting ahead in terms of money is learning to invest. It’s never too late to start but you want to do so wisely. The following contribute post is entitled, How To Invest As A First-Time Investor This Year.
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Always wanted to invest your money but don’t know where to start? You’re likely to be in the same boat as others who have very little knowledge or no clue of how to invest their money.
Unfortunately, it’s not something that’s really taught and instead is a learned skill that only so many will then choose to put to use as they start earning money. Here are some helpful tips to invest as a first-time investor this year.
First and foremost, when it comes to investing, it’s good to get to grips with how it works and how to make the most out of every dollar you’re spending. That means understanding everything that comes with investment, a topic that you might not have any personal knowledge of.
It’s not something we learn as kids unless there are influences in our lives that have invested already. A company like Manulife Wealth might be worth reaching out to in order to understand how your money could go further with the help of experts.
It’s an approach that’s much better to take than to try and figure out yourself or to jump in too soon and lose the money you wanted to profit from.
Start off with small investments
With all first-time investors, it’s always good to never bite off more than you can chew. With that in mind, start off with smaller investments, rather than spending all the money you have available on something that might not pan out.
Smaller investments are going to help drip feed what you’re investing into and it means you’ll have less of a bad experience with investing if you’re only losing small amounts to begin with.
Putting your money all on one investment and then losing it, might sour your experience so much that you don’t invest again.
Mix up your portfolio with low and high-risk investments
Try to mix up your portfolio with both low and high-risk investments. This is useful to do because it gives you a good chance of making a profit with some and other investments that might have made a loss, could make a gain on other investments.
The mix of low and high risk also gives your money the best opportunity for success because you’re spreading your risk more evenly.
Review your portfolio regularly
It’s useful to take a look at your portfolio regularly to ensure you’ve made all the relevant decisions and reviewed what might need to be sold or added to.
Diversifying your portfolio is one thing but you should be actively keeping up with a review of your investments every now and then.
Ensure you have a variety of short-term and long-term investments
Just like the low and high-risk investments, make sure you mix up the length of the investment too. Having a mix of both short-term and long-term investments again spreads the risk but could help set you up for the future too.
Aside from the typical life investments such as a first home, there are plenty of other investments out there worth exploring.
