Managing personal finances is one of the most important responsibilities of our lifetime. It’s standard to tip 20% or so when you dine out, so why not tip yourself? Both literally and figuratively, rewarding your future self with periodic savings and knowledge compounds over time. The following list serves as a complementary resource for a beginner’s guide previously published and is just as helpful. This practice of short-term sacrifice and discipline can yield long-term comfort and ease. Here are 25 tips to keep in mind:
Make a budget and stick to it:
Create a budget that includes all your expenses and income, and track your spending to make sure you stay within your budget. For example, if you make $3,000 per month and your expenses total $2,500, you have $500 left over for savings, investing, and discretionary spending.
Save at least 10% of your income each month:
Setting aside a percentage of your income each month can help you build an emergency fund, save for future expenses, and invest for future nest eggs like a house. For example, if you make $3,000 per month, saving 10% would mean setting aside $300 each month.
Avoid impulse purchases:
Think carefully before making any purchases, and avoid impulse buys. Make a list of what you need before you go shopping, and stick to it. Prioritize needs over wants first.
Use cashback and reward credit cards for purchases, but always pay off the balance in full every month to avoid interest charges:
Credit cards that offer cash back or rewards can be a great way to save money, but only if you pay off the balance in full each month to avoid interest charges.
Track your expenses regularly:
Use a budgeting app or spreadsheet to track your expenses, and review it regularly to identify areas where you can cut back on spending.
Don't take on too much debt:
Avoid borrowing more than you can realistically pay back. Consider a debt repayment plan to pay off credit card or student loan balances.
Prioritize paying off high-interest debt first, such as credit card balances or personal loans:
Paying off high-interest debt first can save you a significant amount of money in interest charges over time.
Invest in a retirement account as soon as possible, such as an IRA or 401(k):
The earlier you start investing in a retirement account, the more time your money has to grow. Take advantage of any employer-matching contributions if available (free money).
Consider hiring a financial advisor to help you manage your investments and plan for the future:
A financial advisor can provide expert advice on investment strategies and help you plan for long-term financial goals, like retirement.
Automate your savings and investments:
Setting up automatic transfers from your checking account to your savings and retirement accounts can help ensure that you save and invest regularly. As the saying goes, “time in the market is better than timing the market.”
Avoid unnecessary fees, such as ATM fees or overdraft fees, by keeping track of your account balances:
Monitor your bank account balances regularly to avoid overdraft fees or other unnecessary charges. If you anticipate using cash for an event, utilize your bank’s ATM ahead of time to avoid those restaurant-style ATMs that charge up to $10 per transaction.
Keep an emergency fund with at least three to six months’ worth of living expenses in a high-yield savings account:
An emergency fund can help you weather unexpected expenses or job loss without going into debt. It’s better to have it and not need it than need it and not have it.
Take advantage of employer-sponsored benefits, such as health insurance and retirement plans:
Employer-sponsored benefits can save you money on healthcare costs and help you save for retirement. Unexpected healthcare costs can set families back several years.
Avoid lifestyle inflation:
As you earn more money, resist the temptation to spend more on discretionary items like entertainment or dining out. Instead, save and invest the extra money. Living below your means as you progress through a career is the best way to achieve financial goals.
Consider a side hustle or part-time job to earn extra income and boost your savings:
A side hustle or part-time job can help you earn extra money to put towards savings or paying off debt. For example, replacing Friday and Saturday nights at the bar with working behind the bar can boost your future.
Review your credit report regularly to ensure there are no errors or fraudulent activity:
Monitoring your credit report can help you catch errors or fraudulent activity early, which can prevent damage to your credit score. Mistakes happen out of our control, and not catching them can become costly.
Don't be afraid to negotiate your salary or ask for a raise:
Negotiating your salary or asking for a raise can help you increase your income and boost your savings. As Michael Scott says, “‘You miss 100% of the shots you don’t take,’ - Wayne Gretsky”
Plan for big expenses:
Planning for a down payment on a house, a car, a child’s education, etc. can help you avoid going into debt and ensure that you have enough money saved up to cover the costs. For example, if you want to save for a $20,000 down payment on a house in five years, you would need to save around $333 per month (in today’s dollars).
Consider alternative forms of transportation:
This can be dependent on where you live. If possible, commuting with a bike or public transportation can save money on parking, gas, and future car maintenance.
Eat at home more often:
Cut back on dining out and discipline yourself beyond that first round. As food and beverage costs continue to climb, this can save you a significant amount of money each month. See for yourself: look back at your prior year’s expenses and see how much this category adds up…
Be patient and stick to your financial goals:
It may take time to see the results of your efforts, but persistence will pay off in the long run. Long-term thinking is the best approach for maintaining peace of mind.
Shop around for the best deals on big purchases:
Taking the time to research and compare prices can help you save money on big purchases. For example, if you're buying a car, compare prices from multiple dealerships and negotiate the price to get the best deal.
Consider renting or buying used items to save money:
Renting or buying used items can be a cost-effective alternative to buying new items. For example, you could rent a designer dress for a special occasion instead of buying one, or buy a used car instead of a new one.
Educate yourself about personal finance:
Read books, articles, and blogs about personal finance to learn more about managing your money effectively. The more you know about personal finance, the better equipped you'll be to make smart financial decisions. This intro series about Bitcoin is a good place to start.
Practice gratitude and contentment:
It's important to remember that money can't buy happiness, and that true wealth comes from relationships, experiences, and a sense of purpose. Cultivate gratitude for what you already have, and focus on building a life that brings you joy and fulfillment. This can help you avoid the temptation to overspend or pursue material possessions at the expense of your long-term financial health and overall well-being.
Practicing the above will prove fruitful to achieve financial goals and long-term success, no matter what life throws at us. Thank you for reading!
Disclaimer:
The above content and resources are for educational purposes only. Should you choose to apply the practices described in the above and/or linked content, you do so at your own risk and I shall in no event be liable for any financial loss suffered. It is highly recommended to seek professional advice from a licensed advisor before making any investment decisions.