The key to becoming a financially healthy person is to manage your finances efficiently. A financially healthy person usually deals well with finances; he or she pays their bills on time and also has money left to put towards their retirement funds. Today, it has become more important to save money and to put money away for emergencies than ever before. Planning for the future as well as all your financial decisions becomes the determining factor that can improve your financial health.
Find out how healthy your finances are by simply calculating your net worth, assets, and liabilities. You may have tried our tips on financial health before. The simple tips given earlier to boost your financial health may have improved your financial health. Tips like bring your lunch to work, set up emergency funds, and reduce your debts, might have helped you to become a more financially healthier person, but some people may still not be in tip top financial health, and may need some more advice to further manage their finances.
You may be shocked to learn that the majority of people in America, about 58% of them, don’t have a proper retirement plan. An average American will usually need about $300,000 to support themselves after they retire, but on average, people have only 25,000 saved when they retire. (How to Manage Your Finances: WikiHow). Below are some tips that will help you manage your finances better.
Tip # 1. Live within your means
Most Americans, especially the ones who have graduated from college and started working at a new job, find that they are often spending more than what they make. We are encouraged to spend more money than to save it. Financial difficulties can arise later on in life if your credit keeps on increasing and you miss a payment on one of your credit cards, a major bill (other than mortgage) and medications or medical bills when you retire. To get out of financial debt and poor spending patterns, you need financial planning and discipline.
“There is no dignity quite so impressive, and no independence quite so important, as living within your means.” — Calvin Coolidge
Create a budget for your finances.
The first step in managing your money is to create a budget for your finances. This may sound unpleasant, but this simply means keeping track of your income and expenditures to figure out how much money is coming in and what you are spending your money on.
Make a list of what you need and want
This should not be too complicated. We have unlimited wants, but our immediate needs are simple. We need to pay our utilities, buy groceries, and we need to go to work, so that we can earn a living. On the other hand, we want to go to a party after work, take a vacation, and buy some fancy stuff. When we don’t take care of our needs before wants, it might cause chaos in our lives. For example, you need to fix your wall before you can put up pretty wallpaper in a room. (How to Create Your Own Needs and Wants List)
Tip #2. Spend your money wisely
Our little expenses and bad spending habits here and there can add up to larger amounts. For example if you drink coffee every morning at your local coffee shop for $5, it could end up costing you $1500 a year, only on coffee. When you are buying something, make sure that it is a wise investment. This goes for anything you buy, from your groceries to the cloths you wear. Anything you buy should be the best value for your money. Buying a house, car, college education, life insurance plans, and a fixed deposit plan, are all good investments. When you buy a house, try making a larger down payment to reduce your interest rate. Your budget should balance out with the amount of mortgage you pay; lowering your overall house payment cost. Making payments on your other debts such as credit cards and car payment is very important for building a strong credit history.
Tip # 3. Invest a part of your income
Find out about different investment options you have available. If you are just starting out; find something that you can start with a small amount of capital. You should not go for a business that you don’t know anything about or something that is too risky. Try to find help from your friends or family who are already making a profit from investments. The safest way to invest in a market could be mutual funds, which have less risk. The first step to making an investment is to start paying yourself first. Set aside a small amount of money from your paycheck every week. If you can successfully do that, you will be successfully able to invest in stock markets or mutual funds. Before you start investing make sure you learn how to invest money in stock market and mutual funds.
Tip # 4. Build your savings
Make saving a good amount of money by the time you retire a priority in your life. You should monitor your savings each week and let it grow. Even if you have a small budget find ways to save at least 10% of your weekly paycheck. Also find ways to increase your income every month, so that you can keep up with the inflation rates, and meet your growing needs. The best way to start a retirement fund is when you are young. Starting young will help you accumulate a large enough sum of money to take care of your medical expenses and have enough money for your children’s college funds.
In addition to your retirement fund, also keep money saved as an emergency fund. Pay off your debts as quickly as possible. You may need to consult a financial planner to get the most effective plan for your finances. However, remember that your financial health depends on not only how much you make but also how you spend and how efficiently you invest and make your money grow.
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Source: Balanced Life Team