No matter where you are in life regarding career or financial status, you want to make sure you are getting the best out of your money and assets. In this fast-paced society, it could sometimes be difficult to manage your finances well. Surprise emergencies, such as a global pandemic, can pop up and put you further into debt or reduce your savings. So it is important to be mindful of potential financial traps ahead of time.
Finances may not be the most interesting topic for everyone. It is something you must learn in lieu of financial literacy classes and guides not necessarily mandatory at schools and colleges. The same way we learn how to open a bank account, or buy a car, we have to learn how to manage your finances. Here are some helpful starter points for thinking about how to make the most of your money and assets right now:
The first financial tip is to invest. Invest your money. It really does just boil down to those 3 words. If you invest your money now and do it consistently you will have a lot more money in the future. Investing is not always easy, and it is important to find the right investment for you. Here are some different asset classes you can invest in:
- Stock market
- Real estate
- Precious metals
Stock Market Investing
One of the easier paths to investing your money is in the stock market. You can sign up for an account with a robo-advisor and buy your first stock in a snap. There are many robo-advisors on the market, to make your choice easier, check out this robo-advisor comparison for detailed information on the top services.
After you get an account with a robo-advisor, you may not know what stocks to invest in. There are some resources available to you online to learn about stocks, like Motley Fool. Check out this detailed Motley Fool review to learn about everything they offer.
Real Estate Investing
If real estate investing is more of your thing, you have much to learn. Besides needing a lot of upfront capital, there are a lot of nuances that go into real estate investing. To learn more on how to make money with real estate, check out this great guide for real estate investors to learn more.
Precious Metals & Collectibles Investing
If you are more interested in precious metals or collectibles, be aware those are generally not as lucrative of investments when compared to stocks and real estate. In other words, the potential return on your investment is much less.
Lastly, cryptocurrencies seem to be the mythical investment that seems as if no one truly understands. However, even with their inherent risk, the thousands of percentage points of returns on some cryptocurrencies is definitely something to desire.
If you are new to the investing world, this great investing guide article could help you get started with your investments.
If you are not budgeting already, you need to. Just think about it, if you know where your money is going you can easily prevent unnecessary spending. You can notice surprising things, like spending over $100 per month at the coffee shop, for example. Now you can cut back the trips to the coffee shop to once or twice a week to lower your expenses.
Budgeting is not only knowing what you are spending but also creating a plan for how much you will spend in a given time. Most people like to set up their budget on a per month basis. In other words, they will lay out their expenses per month, such as:
- Housing costs
- Car payment
These are likely not the only expenses you have to worry about. You may also have other debt, like credit cards or personal loans. Before you start investing heavily, it is best to pay off your high-interest debt first. Check out these tight budget strategies for help saving money while budgeting.
While you are establishing your budget, one of your monthly budget items should be “investments”. Try to invest a set amount of your income into retirement or investments, a good place to start is 15% of your income.
Get Rid of Debt
As we touched on earlier, getting out of debt is important. Debt with a high-interest rate is practically cumbersome and can work against your investing. For example, if you have a high-interest loan that is a 15% rate, you would want to pay that off before investing in the stock market.
The reason is that you are unlikely to invest in something that has a larger rate of return than 15%. If you pay off your 15% interest debt first you are guaranteeing an automatic return of 15% through paying off the debt.
Paying off lower interest debt before investing is fine, but if it has a very low interest it is typically better to invest first. For example, if you have a great mortgage rate of 2.5%, you can likely find an investment opportunity that will grow by greater than 2.5% per year. If you want to pay the mortgage off first, go for it but you may miss bigger opportunities.
By the way, if you have a high mortgage rate, you could potentially save money by refinancing to a lower rate. Take a look at this article on current mortgage rates for details. Refinancing will help you focus your saved money onto higher interest debt.
Check out this save for retirement vs invest now guide if you are still not sure if you want to pay off your debt first or invest.
Have a Plan
You might have thought that the budget is your plan, however, that is just one piece of a bigger picture. You need to understand what your goals are. Ask yourself the cliche question – “where do you see yourself in 5 years?”.
Do you want a new house or a new car? Perhaps you are planning to have children and want to plan for that financially. If this sounds like you, here is a great guide about typical child costs before they come. Nonetheless, whatever your goals are in the future, you should be making a financial plan to get there.
Time To Take Action
Keeping your finances in order will make you happier and healthier. Money problems and worries lead to undue stress, and you can prevent this if you start now. Take control of your finances. Write down your plan, make a budget and stick to it. Plan your debt eradication strategy and begin to invest today.
If you take these 4 financial tips to heart and stick to your plan as best you can, the 5-years-from-now-you will be thanking the today-you. By then, you will be a ruling investor with enough experience and knowledge to take on anything finance related.