Keeping your finances on track and setting yourself up for a safe retirement requires proper financial habits. If you’re looking for ways to pad your wallet, cover the rising costs of life’s necessities, and help reach your financial goals, incorporate the following 7 tips into your daily life.
1. Create a Budget and Stick to It
It’s important to live within your means—but how do you define “your means”? By setting a budget based on your expenses. Determine your after-tax income first—this is your ‘net income’— this will help you determine how much you can actually spend. Next, determine how much money you need for the non-negotiable expenses: rent, food, gas, etc. Create an emergency savings fund—most financial advisers recommend having at least three months worth of expenses. Then, use the remaining money to determine how much you can spend for superfluous things, including vacations, entertainment, and other recreational costs. Use software like Mint to help make this process a whole lot easier.
2. Set Up Supplementary Forms of Income
If you want to guarantee a healthy financial future, think ahead and do some long-term planning. Consider ways to supplement your current income; if you’re a skilled writer, check out Upwork.com and find freelance clients that pay well for your wordsmith prowess. Perhaps you love animals; sign up for Rover.com and get paid to pet-sit other people’s pooches.
3. Make the Right Investments
Strategic investing can set you up for a lifetime of financial stability. You may choose to enlist the help of a financial advisor who can guide your venture into stocks and bonds, or you may take a more hands-on approach and discover your own—just do so with the advice of a seasoned investor to start.
If you want to diversify your portfolio, consider real estate investing. Buying a second property can offer significant payoff in the long run. Renting out a property provides a monthly income that you can rely on. If you do decide to rent out your second property, do your due diligence and learn how to find good tenants; placing the wrong person in an open property can end up costing more than you earn.
4. Curb Your Credit Card Use
If you frequently run up a credit card bill and can’t seem to pay it off with ease, it’s time to curb credit spending. Use cash whenever possible, and avoid charging things that you can’t afford right now—unless they’re necessities. Credit is a great tool when you’re buying something big: a home, a car, etc. However, it’s not a must-have for the rest of life’s purchases.
5. Automate Your Bill Payments
If you are unable or don’t remember to pay the minimum on your credit card payments each month, late fees and interest will build up. Set up automated payments to ensure you make your payments on time and avoid racking up penalties.
6. Automate Your Savings
Instead of having to transfer money from your checking account every time you get a paycheck, automate regular, recurring transfer of funds from your main checking account to your savings accounts. This will ensure funds are automatically moved over to the designated accounts, meaning you can save without having to put in any thought or effort. Set a savings goal to work towards and watch your money accumulate without lifting a finger.
7. Read Financial Self-Help Literature
If you want to improve your financial prowess, you’ll need to learn from the experts. Try to read at least one financial self-help book per month. Even if each book only gives you one or two new actionable insights, it’s a worthy investment of your time. Soak up financial knowledge like a sponge, and stay abreast of the latest financial tips and tricks to ensure you’re putting your best money foot forward.
These seven tips can help you lay the groundwork for a bright financial future. Practice these habits and change your financial stars today.