Personal Finance Tips – Part I 

Mindset & Goals

How do we get in the right mindset to tackle finances? The first question to ask yourself is what your relationship with money is and how you manage it. Are you a great saver? What are your spending habits? Do you have a lot of debt or none at all? Although thinking about money can cause anxiety and stress, it can also allow you to reassess your current financial status and make sound financial decisions going forward.

Planning is an excellent habit to have in general, but especially when it comes to money. It can relieve stress and allow you to prepare for the unexpected moments in life. Planning can also help you achieve your goals. What are your financial goals? Is it buying your dream home, saving for retirement, or having a family vacation? No matter how big or small the dream is, the outcome depends on how you manage your finances.

Whether you are starting your first job or have been working for years and are a little more settled, saving is a big part of the financial do’s and has a significant impact on the trajectory of your life. Unfortunately, saving can sometimes mean sacrifice. That doesn’t mean giving up the things you love and the hobbies you enjoy, but it does mean assessing things you could live without or don’t use enough to justify paying for them. Always remember to spend mindfully.

DO – Track Your Current Spending Versus Income

Tracking spending habits is a significant first step because you evaluate your financial state. This knowledge is necessary because it allows you to see if you are spending more money than you make, more than that, what you spend it on. You may learn that you have money left over, which is excellent and allows for saving or even investment opportunities, depending on the amount. This information gives you options and the potential to feel financially stable and achieve your goals.

Most people overspend, so be easy on yourself if the outcome differs from what you expect. Ignorance is bliss in many ways, and when we don’t keep track of what is going on in our accounts, we can ignore the fact that we are spending more than we make. However, this can backfire when no money is left to spend. Having the numbers in front of you can open your eyes and make you think about the needs versus the wants.

There are several ways you can lay out your expenditures. Start with your income and take out the necessary payments, such as mortgage, utilities, phone payments, car payments, loans, credit cards, etc. Then, you can work your way down to the more minor expenses, such as subscriptions, hobbies, in-store and online shopping, etc. Look at these numbers and think about what you can and can’t afford. Seeing it on paper gives you a deeper understanding of your finances and how you should spend in the future.

DO – Creating A Budget And Mindful Spending

Now that you’ve seen what you’ve been spending, it’s time to create your budget. Your budget will begin with your necessities, meaning your rent/mortgage, utilities, loans, credit cards, etc. After the must-haves, a good practice is to make room for savings, which can also be used as an emergency fund. This should be about six months to a year of your expenses to help if anything unexpected happens or allow you to have savings for something you want.

After you have put some money in savings, look at what is left and allow yourself some fun money. This could be for your morning coffee, a Netflix subscription, or a new outfit. The climate we are in today doesn’t exactly lend itself to fun money, but remember to give yourself some grace because you are not alone living without a nest egg and living paycheck to paycheck. Suppose all you can pay for is the basics; that’s okay. Also, remember that any savings are good, and there are many ways to get creative when saving money.

DO – Create A Plan To Pay Off Debt

While debt is not a favorite topic among anyone, it is necessary. There are various styles of debt; sometimes, it can be an obligatory debt such as a school loan or a medical expense. However, some debt, such as the newest technology or the best car, is optional. These purchases are fun at the time but will ultimately add to a lot of debt and stress in the long run if you can’t afford it. However, setting goals and having a savings plan can allow you to purchase those things later without losing all your money at once.

Credit card debt is another type of debt that holds so much power over individuals. It can get out of control so fast that you’re thousands of dollars in debt by the time you get ready to pay it off. A good rule of thumb is always paying the credit card with the highest interest first. If you have multiple credit cards, you can make the minimum payment on the ones with the lowest interest rates and still make good headway.

If paying your debt feels like you are digging an endless hole, try researching consolidation companies that can help make it easier to control and faster to pay off. Always study and verify that you are using a legitimate company with the lowest interest rates possible.

Using credit cards responsibly can be a great way to build and raise credit, but that is a lesson in self-control and responsibility. It is all a learning process and can be done the right way. Learning how to handle our money and even our debt is always possible.

DO – Save For Retirement

Although it is difficult for individuals to save for retirement in our current economy, it is a task with a considerable payoff if you can make it happen. We must encourage our youth to save for retirement right after graduating college. That money can build over time if you steadily add to a retirement fund.

Retirement funds are what we will rely on as our sole income after working. It may be frustrating to put your money in that account rather than buying something you want now, but sacrificing a little comfort now to be comfortable in our later years will be worth it. We all strive to enjoy life, and a good retirement plan can make that happen, so work now and play later.

Take advantage of benefits that your company offers, such as a 401k. Even adding a small amount of money out of each paycheck can make a huge difference. A pension plan may also be offered through your employer. If your work does not provide those benefits, you can start an IRA so that money is safe and not a risk for spending. Vanguard and Fidelity are just a few companies we recommend looking into to invest your money without paying high fees.