Ever wished you knew what you knew now when you first started earning money?
If not you were wise before your time.
Most of us go through a few different cycles when we first start earning and (hopefully) saving.
There are the type of people who fear spending any money, yet don’t save or invest it effectively.
There are those that freely spend everything they have, but stop once they have no more to spend.
There are those who keep on spending way after they are all spent you, by borrowing from friends, families, and other means of credit.
Then there are those who are young entrepreneurs, even if they don’t know it. They instinctively know how to turn their cash into more cash.
So which type of person were you, and which type are you now?
I was never the type to borrow beyond my means. It was something my father instilled in me from an early age.
I’m thankful to him for this valuable financial advice. He gave me some good advice as I grew up, he was very smart with his money.
Here are 6 valuable pieces of money advice for the younger core. Some of which I learned from my father, others I had to learn for myself over the years.
But either way, valuable lessons I wish I had known before I started earning. I’d sure be a bit better off now for it.
So take a read and see if you agree with this points. Hopefully you pick up some advice, or have something you already know re-enforced.
Learn How to Budget, and Stick to It
This is where money management starts. Yet, so many people either do not know how to budget properly or just do not do it. I still help friends and family with budgeting from time-to-time. It’s an eye-opener if you’ve never done it.
Write down all your fixed expenditure. Then write down all the variables that you think you will spend, then put it in order of priorities. Now look at how much all your bills are versus your income. This shows you how much capacity there is to put some savings aside.
Start a Savings Account
This is something I was all told growing up, and has proved invaluable. Everyone needs a savings account. You never know what life is going to throw at you, so a buffer of at least two months’ pay is always recommended. This will cover you should you lose your job.
Setting up a direct debit is the best way to save. We often think we can’t spare a few bucks, until we take it out automatically at the beginning of the month. Then it somehow becomes something we don’t miss. Strange but true. Try it.
Use Credit as a Last Resort
It’s an unfortunate circumstance that the world seems to operate by companies offering us things we can’t afford. Then they offer easy ways to have things now, buy borrowing on credit. But credit means you’re paying interest. You should always avoid incurring interest charges.
The average credit card debt of young adults is currently the highest it’s ever been. It’s a trap, and a downward spiral once you start taking out credit. The reality is you need to live within your means. If you cannot afford something, you need to ask yourself if you really need it.
Always Live within Your Means
Regardless of how much you earn, there is a limit to your lifestyle. You need to live within your means to avoid spiralling into debt. As mentioned above, with a budget and avoiding credit, you will be within your means.
As you have changes in salary you can make changes to your budget. But essentially you need to see your income and expenditure as a balancing act. Going into debt should be avoided at all costs. If you can’t afford some of the luxuries you want, look into earning more.
Save for Retirement
When you’re young, the last thing you want to do is think about 40+ years away. But those who invest towards their retirement in their 20’s put aside considerably more than those who start later. Using 401k, savings accounts, and IRA’s means you’re getting more back per buck.
The reality is that you will retire one day. That’s the positive mind-set you need to have. So start putting some cash aside each month like you believe it. The last thing you want is financial stress in your twilight years.
Invest in Property
There is some consideration that needs to take place when buying property. Not everyone comes out with added equity, but most who make low risk purchases do. You have two options; either pay rent every month to someone else, or own your own property and pay if off each month instead.
If you buy smart and pay a little extra off the mortgage when you can, you’ll see a good return on your investment. If you can buy a second property to rent out, you’ll have a reliable source of second income.
These financial tips are the bread and butter of managing one’s finances. Yet it’s these fundamentals that can make all the difference.
So why do so many people still end up spiralling into debt?
We live in a consumer and marketing heavy time. There are gadgets and goods we are all told we need.
But by being mentally strong, and living within your means you’ll live a much more stress-free and satisfying life.
Plus, with a little patience you can afford all those things your peers have, and without relying on credit.