If you want to live a financially secure life in the future, you must start acting today. Some people believe that keeping your personal finances in order is quite daunting. In reality, you don’t have to be an expert to manage your funds and avoid common money problems. Are you ready to work towards your long-term financial security? Some monetary goals can be short-term while others are for the longer term. Read on to review the best rules for personal money management and for useful insights from our interview with a financial expert.
Basic rules of personal finance management
Keeping your personal finances in order is not a rocket science. When you become a financially savvy person, you don’t have to worry about debt, crisis, instability, or your future retirement. By following these simple but important steps you can learn how to maintain financial stability and work towards a secure future with solid retirement assets. It’s time to get rid of your money troubles and learn how to handle your money.
# 1 Pay off existing debts
One of the first pieces of advice to improve your financial stability is to get rid of your existing debt. Whether it’s a student loan, credit card debt, or one $ 300 loan Do your best to become independent until next payday. Being debt free is vital to your stability. That way, you can make the next steps easier and know exactly how much money you have.
The interest rates on credit cards and other credit options can be very high. Even if you owe a local bank, you will have to pay off your debt along with interest. It was mentioned in the Federal Reserve Survey found that the average interest rate on a two-year personal loan from a traditional bank was 9.6% in March 2020. The steps below will teach you how to avoid debt in the future.
# 2 Create a monthly budget
This might not be the funnest tip, but establishing your budget is important to meeting your short term and long term financial goals. Regardless of whether you have a regular full-time position, a side job or work as a freelancer, you should set your monthly budget with all of your expenses. This can be an online spreadsheet or a spreadsheet written on a piece of paper. The aim is to present your current situation and to help you see what you need to leave out or change in order to achieve financial stability.
Almost half of Americans claim they don’t have enough clarity about how much they can afford to spend each month and how much to save for their future. Creating a budget can go a long way in improving this situation and highlighting which categories may be left out.
# 3 Set up an emergency fund
The FederalReserve.org survey found that over 40% or American consumers cannot cover a $ 400 emergency. This means that even people with permanent employment do not know how to save enough and set up an emergency fund so that you can pay unforeseen expenses out of your own pocket without running into debt.
Experts advise you to set up an emergency bank account and put a small portion there every month until you have at least three months of living expenses. If you have enough expense for six months, it will be even better. This way you protect yourself and your family from financial problems and you will not be unsettled by unforeseen costs.
# 4 Save up for your retirement
You may be between the ages of 20 and 30 and think you have plenty of time to start planning your retirement. However, time goes by very quickly and the best time to save for retirement was yesterday! It is up to you how much you are willing to allocate in your savings account each month. However, starting earlier means lower monthly savings in the long run.
By the time you turn 50, you should have six times your current salary in this account. When you turn 60, experts advise consumers to have 10 times your salary. The Overview of consumer finances shows that the The average retirement balance of all American families was $ 255,130. The average retirement savings of all households was $ 65,000.
Interview with a finance coach: answers to 3 FAQs
We decided to ask Robert Pagliarini, a famous financial expert and pension coach, some questions about personal finance management.
Q: What do you think of investing?
ON: In my opinion, people should invest more in themselves. This is probably the best and safest investment you can make today. Invest your time and money in good education, additional training, additional courses, and other certifications. Not only will this expand your knowledge and make you a better specialist in your field, but it will also help you earn more for your job and strive for financial stability.
Q: When should ordinary consumers start saving?
ON: The sooner the better. There is no single answer to this question. But even if you graduate and do a part-time gig, you can save a few dollars a week. This habit sticks with you as you grow up and helps you constantly think about your future. Once you have a regular position, it is easier to allocate a larger amount each month. Failure to save for emergencies or for your retirement can lead to serious financial problems.
Q: What is a good example of budgeting?
ON: In my opinion, using a 50/30/20 budgeting scheme can make this process easier and help the consumer understand where the money is going. This approach is easy to follow. You should spend 50% of your monthly income on essential expenses such as mortgage, rent and groceries, 30% or other necessary expenses (mobile phone, internet bills). The rest of 20% of your income goes towards saving and building an emergency fund. As a result, following this simple rule, you can save on a down payment on a new car or house.
In conclusion, personal financial management is essential for any consumer looking to improve their standard of living. Improving your financial literacy is necessary as this will help you avoid currency disruptions and become financially fit.