Financial Education is an integral part of life. Yet, we are never taught about money or good money habits at school. If you don’t have adequate knowledge about financial aspects, educating yourself would be a good place to start. Read books and blogs and find information from credible sources. Be careful about the online financial gurus, who claim to be millionaires, trying to sell you products and services.
Be careful about Credit Cards:
Paying off credit card debts takes you one step closer to financial security. The high-interest rates on unpaid balances of credit cards can be a big roadblock to being financially secure. A strategy to avoid credit card debts is to practice self-control and delayed gratification. When you use credit cards to purchase stuff, you are using borrowed money. Refrain from purchasing everyday items on your credit card; use your debit card instead. Use your credit card only if you are sure to be able to afford to pay off the balance every month. When it comes to credit cards, the rule of thumb is to not keep more than three. Having more credit cards can make it difficult to keep track of each of them.
Create a Budget and Track your Money:
Living within your means is an important financial strategy. Track where your money goes, and do not let your expenses exceed your income. Creating a budget can help you with this. It is beneficial to budget at the beginning of each month- to allocate money to unavoidable bills. This kind of allocation makes it clear how much of your money is non-negotiable. This leaves room for cutting certain habits and things that add up to a huge amount over the course of a month. Also, try to keep your non-negotiable expenses to a minimum. For example, you can change your location to a smaller place to save on rent.
Build an Emergency Fund:
Almost all financial books educate on the importance of paying yourself first. Even if your salary is quite low, set aside some money as an emergency fund every month. The rule of thumb is to pay yourself a minimum of 10% of your income. However, it is to be noted that investing your cash into a standard savings account will earn no interest and is not a great situation when the inflation rates are taken into account.
Start Saving for Retirement Early:
You might have decades before you want to retire. But the strategy to take if you want to retire comfortably is to start saving up for it early. A good rule of thumb is to save up at least ten times your salary saved up by the time you are 60. Make use of special accounts that give tax breaks, such as 401(k) and 403(k).