These 7 simple rules will help you in your journey to financial success.
Most of us are working towards financial security. That’s why we wake up every day, work, and earn a decent living. And although it seems that reaching our financial goals is not as easy as we would like it to be, hopefully, these simple rules will help you in your journey to financial success.
1.Get paid what you’re worth and spend less than you earn
Do your research before accepting any job position. Find out what that position is worth in the market, both within and without the company. Then, conduct an evaluation of your skill sets. Look at the tasks you might be required to do, and with that, assess your level of productivity, what contributions you can give to the company, and the going rate.
All of this is necessary because getting paid less than you’re supposed to, regardless of how The small difference in money will affect your finances significantly in the long run.
Here’s a hard pill to swallow: you’ll never get ahead if you keep spending more than you earn. While this principle may seem simple to understand, many find it hard to follow this rule. But fear not! Even if it may seem impossible to stop spending money on takeaways, shoes, clothes, etc.
A good amount of dedication and the yearning to grow your bank account
can help you retrain your mind and mend your frivolous spending habits. It is far easier to get to financial freedom by spending well below your means than by trying to earn more money.
A good starting point is to make a note of your needs and your wants. Needs are pretty obvious: food, decent clothing, and rent. If you think about it, almost everything else is a want. You might think you need that new appliance you’re seeing on your social media.
But you don’t. Do you really need to buy every new model of the iPhone? Do you really have to buy more shoes? Do you actually require the same car in two different colors? Sorry to break it to you, but no, you don’t; none of these are needs! As soon as you can distinguish between your wants and needs, you’ll be able to have your finances under control.
You also need to understand what’s important to you in life. Differentiating between wants and needs is not enough. You also need to distinguish between the wants that bring you fulfillment and those which don’t. Spend more on the things that elevate your life and save the rest.
The money you bring in will not matter if you keep spending beyond your means. And this truly does test the strength of your willpower. You must follow this rule if you’re determined to build your bank balance and reach finical freedom.
2. Create a budget and stick to it
Having a budget is important because it lets you clearly see how much money is coming in and where it is going. Budgeting is a vital component if you want to gain financial security.
It allows you to set financial goals (for example, how much you want to save each month) and helps you figure out how to achieve them. You can track your money in various ways. If you’re old-school, you can use the traditional method of using a pen and paper to track your spending.
Or you can use apps and websites that automatically show you what your financial goals should be based on your current financial situation. These methods can tell you the brutally honest truth about how much you think you’re spending versus how much money you’re burning. So be warned, you may have to take a few deep breaths when you realize how much you’re spending. On the bright side, once you’re over the shock, these tools can help you make small adjustments to your spending, so you have more to save and invest.
Once you have a clear image of your finances, you can set goals that are important to you and work towards them. This could range from saving for emergencies, buying your dream home, or traveling worldwide. As you start budgeting and managing your finances accordingly, you can sit back and watch your bank balance grow.
3. Pay off credit card debt
Credit card debt can potentially hold you back financially if your arena isn’t careful. Not paying off the credit card debt in time could cost you your dream of financial security (yes. The pun was absolutely intended). Using credit cards is convenient, but sometimes it is easy to forget that this is actual money being spent. This money will eventually have to be paid back by you.
Debt is viewed as a threat to financial security because it prevents you from making the most out of your money. The extra cash could be used elsewhere – somewhere, the money could be useful. For example, it could be used for your child’s college education or contribute to your retirement. The quicker you get out of debt, the more it’ll help your finances: you will have more money to spend on your finical freedom. Along with your financial situation, debt also doesn’t help your health.
It contributes to the heightening of your stress levels. When in debt, one always thinks about how to cover those payments and how to save enough to simply live. We all know the negative side effects of stress, especially on our mental health.
What’s the point in spending money on those expensive skin treatments when the debt will just stress you out and cause more breakouts? Once all your debt is cleared, you’ll be able to breathe and rest easy, knowing you don’t own anything. You’ll only have the usual monthly expenses to deal with, and I think we can all agree that worrying about those expenses is less intimidating than worrying about stress.
4. Work on a Retirement Plan
Consider contributing to a 401(K) plan or any retirement program if your employers offer it. The idea of a 401(K) is that your employer will contribute the same amount of money as you do (to a certain point) to your 401(K) account.
This is known as an ‘employer match .’Although common, not all employers will offer a 401(K).In that case, opt for any other retirement plan they have for you or consider investing in an IRA. While a 401(K) is great for those employed, a Roth IRA is a great account for younger people. It is backed by post-tax dollars. An IRA eliminates the immediate tax deduction, saving you from having to pay a bigger income bite when you withdraw the money upon retiring.
Taking up a Roth IRA as early as possible could result in a bigger pay offer in the long run, even if the amount of money you initially invested was relatively small. The longer the money is kept in the account, the more tax-free interest you get. When planning for retirement, the sooner you start, the better it is. While everyone has different personalized goals regarding the amount they aim for, the ways of achieving them are more or less the same.
5. Have a Savings Plan
With all the financial obligations piled up, it is easy to forget about yourself. A useful rule of thumb is that you should always pay yourself first. Paying all your bills first and then putting aside whatever is left into your savings is a recipe for disaster. Why? Because it will lead to a smaller savings account because you’ll be left with a minimal amount to save.
Before you even consider paying bills, set aside a certain percentage for yourself. You can even have this amount automatically deducted and sent to a different account. Preparing for the future is important, but how on earth can you do that when there is no money? You need to invest in a retirement account for all long terms goals. You should also have regular investment goals to build wealth. Start this practice even if you don’t have much to invest in – something is better than nothing. This way, you’ll at least build the habit of investing, so investing and saving will become second nature when your income grows.
Make sure you have money set aside to pursue your passions. This, for example, could be starting a business. You should have cash reserved for your passion for taking calculated risks and still feeling at ease. To own your own business, you will need a little financial backing for it to take off. Open a savings account and contribute to it every month so that you can explore new opportunities to grow your mind, yourself, and of course, your financial status.
6. Review your Insurance
Many people fall prey to paying more than necessary for life and disability insurance. This could range from adding coverages to car loans; to buying whole-life insurance policies instead of term life policies.(the latter is more sensible); or buying life insurance when you don’t even have any dependants.
Insurance is only beneficial if the coverage is enough to handle whatever losses you face. With regards to those with dependants, do a lot of research to ensure you pick the best life insurance for you and your loved ones. You want to make sure they will be comfortable even in your absence.
It’s safe to assume that during your long life, your lifestyle and personal needs are bound to change from time to time. With a lifestyle change, you’ll also have to change the kind of insurance you have. You need to make sure you are constantly reviewing your insurance plans you have to ensure it fits with your current lifestyle. Whether it be buying a car, putting your child through school, or an unexpected medical emergency, having specific insurance is very beneficial.
7. Update your will
Research shows that only a small percentage of the population has a valid will. If you have dependents, you must have a will. It does not matter how much you have to give; a will is necessary. Technology is your best friend if it seems daunting to go into a lawyer’s office and have them draft your will.
There are several software that drafts it for you instead. Once you have written your will, don’t forget about it. It’s easy to assume that your initial draft is good enough and that your future is secure. This is not the case. Like the insurance plans, which you always have to review with a changing lifestyle, the same principle applies to a will.
Ensure you always add (or remove) things from your will before it’s set in stone. We all worry about our loved ones. We want to make sure they have a safe and secure future. This is why a will is necessary. And more importantly, this is why you need to constantly update it. Your will dictates who gets what, and while there is a process through which family members can argue that they haven’t been given enough, it’s time-consuming and expensive. Protect your loved ones with a valid will that you constantly review so that every person you love gets the protection they need.