Financial planning and staying on top of your income and expenses is easier said than done; since most high schools don’t have a financial planning curriculum, many young adults enter into the professional world clueless about how to manage their finances. And managing your finances is no easy task either. There are multiple things that you need to take into account: debt, expenses, credit score, interest rates, inflation rates, and savings. Financial planning can be a bit stressful, but it doesn’t have to be. These six tips will help you with everything you need to know about managing your finances.
1. Save More, Spend Less
The very first tip requires you to practice a little bit of self-control. Working towards saving up more and cutting down your expenses is an excellent way of building up your financial profile. And it doesn’t have to be a big sacrifice either. If you slowly and gradually reduce your general expenses, you can increase your savings for the future.
Oftentimes, it’s easier to save up and spend less than it is to earn more. But it’s also essential to ensure you’re getting paid what you’re worth. This means scouring through the job market and checking whether your current salary matches the market salary for your position.
2. Set Your Own Budget
Everyone has their own goals, each of which requires a budget. Setting your own budget is the best way to avoid falling into debt. Keeping track of your expenses will help you identify which ones are necessary and which ones you can cut down. For instance, buying a cup of coffee daily might not seem like a huge expense. But once you identify the total cost of buying a cup of coffee for 30 days straight, then you might realize that this is something you need to work on. Setting your budget will also help you avoid spending more than you earn, which is a piece of advice that most financial help advisors stress upon. Try experimenting with different budgeting methods so that you can adopt one that perfectly fits you and your lifestyle.
3. Start Saving Up for Retirement
If you don’t know when to start saving for retirement, the answer is now. It’s never too early to set aside a small portion of your income for your retirement days. Planning early on is key to having financial security in your later years. Given the rise in healthcare costs, it is advised to start saving up as much as possible for your future. Multiple companies offer 401K retirement plans to their employees. Some companies may also employ service providers who offer retirement plan advice to their clients, so if your employer provides you with this service, it’s best to take advantage of it.
4. Anticipate Your Expenses
Even if you strictly follow the budget that you planned out for yourself, it’s natural for unexpected expenses to pop up in your life. This could include shifting to a new apartment or getting an injury that needs to be taken care of. Whatever the case may be, it’s best to have a strategy to deal with these expenses. One way of doing this is by talking to your financial advisor or consulting someone who has gone through similar cases before. It also helps to have a separate fund set aside for these expenses, as they are bound to pop up sometimes.
5. Pay off your Debt
Given the rising inflation rates, you should pay off your debts as soon as possible. This includes any loans you’ve taken out from banks and credit card debt. It’s extremely convenient to use credit cards to make large purchases, due to which we end up paying more than we generally would have. Having credit card debt significantly lowers your credit score, meaning it will be harder for you to secure a loan or a new credit card.
6. Invest in other Assets
Your job shouldn’t be your only source of income. Investing in different assets will allow you to gain a return that will help fund your retirement and saving plans. The best part about investing is that you don’t even need a large lump sum of money to do it; you can easily invest in stocks and bonds or use investing apps like Robinhood to gain a return by investing a relatively small amount. Websites like VectorVest can also help you choose which stocks to trade.
You don’t need a certification in financial planning to be a pro at managing your finances. By following the six tips above, you can attain financial security that will be the stepping stone to achieving the rest of your goals.
