Even if it takes time or your unsure where to start, taking a few moments to get organized and tackle your personal finances can not only stop financial leaks, but lessen your overall stress as well. Not to mention, it frees your mind to focus on important things, like building your business.
Here’s a look at 13 smart ways to set your life up for financial success.
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Create a personal budget.
The first step in creating a budget is to set your goals. What are your financial goals? Do you have debts you need to pay off? Do you want to minimize the debt you graduate with? Are you trying to save for a car, a vacation, or your future? What do want to accomplish while you are in school and when you graduate? Budgeting involves tough choices, but having a goal will make budgeting a little less painful and allows you to start planning for the future. Source: Personal Finance @ Duke
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Embrace simplicity.
Warren Buffett lives in a house he bought in 1957 for $31,500. Carlos Slim has lived in the same house for more than 40 years. Constantly pursuing things you don’t need puts you on a financial treadmill, not an upward escalator. Source: Mint.com
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Start early.
The sooner you start managing, saving, and investing your money, however limited, the better off you’ll be as long as you avoid mistakes like throwing all your investment money into one stock. Slim lived this advice, buying shares in a Mexican bank at age 12, and earning 200 pesos a week at as a teen working for his father’s company. Source: Mint.com
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Pay yourself first.
One of personal finance’s oft-repeated mantras is “pay yourself first”. No matter how much you owe in student loans or credit card debt … it’s wise to find some amount – any amount – of money in your budget to save in an emergency fund every month. Source: Investopedia
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Pay off debt.
In a 2014 interview with Business Insider, Cuban revealed what he wished he’d known about saving money in his 20s: “That credit cards are the worst investment that you can make. That the money I save on interest by not having debt is better than any return I could possibly get by investing that money in the stock market. I thought I would be a stock market genius. Until I wasn’t. I should have paid off my cards every 30 days.” Source: GOBankingRates
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Create short-term goals.
One study showed that the farther away a goal seems, and the less sure we are about when it will happen, the more likely we are to give up. So in addition to focusing on big goals (say, buying a home), aim to also set smaller, short-term goals along the way that will reap quicker results—like saving some money each week in order to take a trip in six months. Source: The Muse
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Determine your debt to income ratio.
Add up what you spend each month on debt, including mortgage, credit-card, student-loan and car-loan payments. Then divide that figure by your monthly pre-tax income. That is your debt-to-income ratio. Sheryl Garrett, the founder of the Garrett Planning Network, says a good rule of thumb is to have a debt-to-income ratio of less than 36%. If you exclude the mortgage payments, aim for less than 28%, she says. Source: The Wall Street Journal
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Invest in mutual funds.
A mutual fund is a professionally managed investment vehicle that pools investor money to purchase securities, such as stocks and bonds. Mutual funds are popular with investors because they can provide asset diversification with a small upfront investment. For example, if you have $1,000 to invest, it probably makes more sense to purchase $1,000 worth of shares in a diversified mutual fund than to buy $100 worth of shares in 10 different stocks. Tracking and following 10 different stocks can also be very time-consuming, making mutual funds an even more attractive choice for beginners and passive investors. Source: Nerd Wallet
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Encrypt smartphone messages.
Consider installing a text message encryption app on your phone that has self-destruct functionality. That way, the text containing your credit card information will be deleted from both phones after a pre-set period of time, lessening the exposure. One such app for iPhone is Signal. For Android users, one product is TextSecure. Source: Nerd Wallet
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Get rid of your junk.
How many things do you have lying around your house collecting dust? Sell those items and throw the money at your debt. My wife and I do this several times a year and usually pocket several hundred dollars. Source: ReadyForZero
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Pay as you go.
I am a big believer in using debit cards, rather than credit cards as much as possible. Ideally, a debit card that is prepaid or that is tied to a checking account where you have declined overdraft coverage. There is no more expensive form of bondage than spending more than you have and paying interest of 15% or more on your credit card. Source: Suze Orman
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Reprioritize luxury.
It may surprise you, but the world’s wealthiest person, Carlos Slim (the same guy who could spend more than a thousand dollars a minute and not run out of money for one hundred years) does not own a yacht or a plane. Many other billionaires have chosen to skip these luxury items. Warren Buffet also avoids these lavish material items. “Most toys are just a pain in the neck,” he’s said. Source: Lifehack
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Always have cash on hand.
Billionaires and trust fund babies refer to this as “liquidity.” The rest of us can refer to it as “make sure you don’t end up living in a cardboard box.” Even the most aggressive high net worth investors I’ve worked with kept a large chunk of liquid assets (“cash”) on hand for emergencies. It seems like a no-brainer, but having an emergency fund is one lesson millionaires and the rest of us should always heed. Source: Wisebread
What personal finance tips do you live by? Let us know in the comments.
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