Create A Budget
Having a budget and sticking to it can improve anyone’s financial picture. Yes, it takes discipline but in today’s tech-friendly world it can all be done from your fingertips. Apps and websites like Mint.com and Level Money can directly connect to your Checking Account, Savings Account, and credit cards so you can begin tracking your expenses instantly. Knowing where you’re spending your money is the first step. From there you can adapt a strategy such as the common 50-30-20 budget. This strategy guides you to use 50% of your income for “needs”, 30% to “wants”, and the last 20% should be allocated to your “savings”. A budget with strict discipline is a tangible step in the right direction in creating a sustainable financial future.
Track Your Credit
No one likes a bad credit score. But do you know how it can affect your financial future? Securing a low-interest rate loan for a home, car, etc. with a respectable credit score can save you lots of money in the future. Just because you are not ready for a big purchase at this point in your life does not mean you should let your credit slide. For example, the difference between a 620 credit score and a 760 credit score might cost you more than $80,000 on a 30-year mortgage. Take a look at websites like creditkarma.com and see where you can improve now!
Take Advantage of Compound Interest
The power of compound interest is the reason that financial planning and retirement experts recommend starting a retirement plan early. A 20-year-old who places $5,000 in a one-time investment that earns an average 8-percent annual return would have $160,000 at age 65, while a 39-year-old who makes a one-time $5,000 investment at that rate of return would have only $40,000 at age 65. The advantages are even greater for someone making regular contributions to the investment instead of the one-time contribution method.
Have an Emergency Fund
An Emergency Savings fund is very important. While there is no set guideline for the amount of money you should have in your Emergency fund, a common recommendation is to have about 3 to 6 months of living expenses saved. You might not see the need for an emergency fund at the moment. But, when the need for one emerges it is usually too late. An event such as extensive car repairs, pipes bursting, or an unforeseen medical expense can put someone in a serious financial hole if they are not prepared.