The specific personal finance information that you need varies at different times in your life and based on your situation. For example, you can afford to use riskier investment strategies if you have money to lose or retirement is decades away. However, there are also personal finance guidelines that never really change regardless of where you are in life. The five tips below will help keep you financially fit whatever your age and life situation.
Have a Budget
Whether you struggle to make ends meet or have more money than you know what to do with, you should have a budget and know where your money is going. Even the wealthiest people can mismanage their money and end up broke while it is still possible to save money and live a fulfilling life on a modest income. Your budget should be realistic and should allow for spending on things that you enjoy. You should also remember to include irregular or annual expenses, such as the cost of vacations, personal grooming, birthdays and holidays.
Prioritize Reducing Debt
You can spend less in both the long and short run if you work first on reducing your debt and then on staying out of debt as much as possible. It may be a smart move to take out student loans to pay for college, but you then need to work on paying them off sooner rather than later. One way to speed this up may be refinancing with a private lender. You can check out flexible options for repayment with a student loan calculator to get a better idea of what your savings might be. If you have a mortgage, there are advantages and disadvantages to paying it off sooner, and you may want to consult a financial planner about the best strategy for you.
Have an Emergency Account
The best way to avoid debt going forward is to have an emergency account. This means that when you have to deal with unexpected expenses, you won’t have to use credit cards or other high-interest solutions. How much you need in this account varies based on your lifestyle and needs. Starting with nothing and saving up $500 is a good start. Most people aim for three to six months of expenses. If you are a freelancer, you might want to eventually have a year’s worth or more.
Use Credit Cards Wisely
You don’t actually have to give up credit cards entirely, and in fact, you can use them strategically. The key is to pay them off each month instead of letting a balance linger. Well-managed credit cards can increase your credit rating, and you can also build up points for travel and other benefits by using them regularly.
Have Goals
Once you have stabilized your budget, your debt and your emergency spending, you should look at ways to make your money do more work for you. You should be saving for retirement, but you might want to get into investing in other ways as well. You may have specific goals, such as setting up a college account for your children. You might want to save up to buy a franchise or purchase a boat. Figure out what you want and work it into your budget.