Now I’m no finance guru but I came across a fantastic article on Personal Finance and loved it (and actually understood it!) so much that I wanted to share parts of it with you!
So from the best ways to budget to how to boost your earning potentiallike a pro, these nuggets of financial wisdom are as fresh as the day they were published.
First Things First: A Few Financial Basic Must-Do’s
1. Create a Financial Calendar
If you don’t trust yourself to remember to pay your quarterly taxes or monthly credit card bill, think about setting appointment reminders for these important money to-dos in the same way that you would an annual dentist check up or car service.
2. Check Your Interest Rate
So many people don’t even think about this! Here’s a question or two: Which loan should you pay off first? A: The one with the highest interest rate. Q: Which savings account should you open? A: The one with the best interest rate. Bottom line here: Paying attention to interest rates will help inform which debt or savings commitments you should focus on.
3. Track Your Net Worth
Your net worth—the difference between your assets and debt—is the big-picture number that can tell you where you stand financially. Keep an eye on it, and it can help keep you on track with the progress you’re making toward your financial goals — or warn you if you’re veering off track.
How to Budget Like a Pro
4. Set a Budget.
No buts here! This is the starting point for every other goal in your life. You may think this is a painful process, but you’ve only gotta do it once, so just do it. You’ll thank yourself later on.
5. Consider an All-Cash Diet
If you’re consistently overspending, this will break you out of that rut. Don’t believe me? The cash diet has changed the lives of many people, including me! Give yourself a cash limit each week and stick to it, leave your cards at home. It’s not as scary as you think. Really.
6. Take a Daily Money Minute
This one comes straight from LearnVest Founder and CEO Alexa von Tobel, who swears by setting aside one minute each day to check on her financial transactions. This 60-second act helps identify problems immediately, keep track of goal progress — and set your spending tone for the rest of the day!
7. Allocate at Least 20% of Your Income Toward Financial Priorities
By priorities, I mean building up emergency savings, paying off debt, and padding your retirement nest egg. Seem like a big percentage? Just incorporate it into your budget, it’s not as big as you think.
8. Budget About 30% of Your Income for Lifestyle Spending
This includes movies, restaurants, etc — basically, anything that doesn’t cover basic necessities. By abiding by the 30% rule, you can save and splurge at the same time. I love this rule!
How to Get Money Motivated
9. Draft a Financial Vision Board
You need motivation to start adopting better money habits, and if you create a vision board, it can help remind you to stay on track with your financial goals.
10. Set Specific Financial Goals
Use numbers and dates, not just words, to describe what you want to accomplish with your money. How much debt do you want to pay off - and when? How much do you want saved, and by what date? Be specific.
11. Adopt a Spending Mantra
Pick out a positive phrase that acts like a mini rule of thumb for how you spend. For example, ask yourself, “Is this [fill in purchase here] better than my Overseas Holiday next year?” or “I only charge items that are $40 or more.”
12. Make Bite-Size Money 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.
13. Banish Toxic Money Thoughts
Hello, self-fulfilling prophecy! If you psych yourself out before you even get started (“I’ll never pay off debt!”), then you’re setting yourself up to fail. So don’t be a fatalist, and switch to more positive mantras.
14. Get Your Finances – and Body—in Shape
One study showed that more exercise leads to higher pay because you tend to be more productive after you’ve worked up a sweat. So taking up running may help amp up your financial game. Plus, all the habits and discipline associated with, say, running marathons are also associated with managing your money well.
15. Learn Gratitude
Gratitude means appreciating what you have now, instead of trying to get happy by acquiring more things.
16. Get a Money Buddy
According to one study, friends with similar traits can pick up good habits from each other — and it applies to your money too! So try gathering one or several friends for regular money coffee catch-ups.
How to Amp Up Your Earning Potential
17. When Negotiating a Salary, Get the Company to Name Figures First
If you give away your current pay from the get-go, you have no way to know if you’re lowballing or highballing. Getting a potential employer to name the figure first means you can then push them higher.
18. You Can Negotiate More Than Just Your Salary
Your work hours, official title, maternity and paternity leave, holiday time, company vehicle and which projects you’ll work on could all be things that a future employer may be willing to negotiate.
19. Make Salary Discussions at Your Current Job About Your Company’s Needs
Your employer doesn’t care whether you want more money for a bigger house — it cares about keeping a good employee. So when negotiating pay or asking for a raise, emphasise the incredible value you bring to the company.
How to Keep Debt at Bay
20. Start With Small Debts to Help You Conquer the Big Ones
If you have a mountain of debt, studies show paying off the little debts can give you the confidence to tackle the larger ones. You know, like paying off a modest balance on a department store card before getting to the card with the bigger balance. Of course, we generally recommend chipping away at the card with the highest interest rate, but sometimes psyching yourself up is worth it.
21. Don’t Ever Cosign a Loan
If the borrower — your friend, family member, significant other, whoever — misses payments, your credit score will take a plunge, the lender can come after you for the money, and it will likely destroy your relationship. Plus, if the bank is requiring a cosigner, the bank doesn’t trust the person to make the payments.
22. Opt for Mortgage Payments Below 28% of Your Monthly Income
That’s a general rule of thumb when you’re trying to figure out how much house you can afford.
How to Shop Smart
23. Evaluate Purchases by Cost Per Use
It may seem more financially responsible to buy a trendy $5 shirt than a basic $30 shirt — but only if you ignore the quality factor! When deciding if the latest tech toy, kitchen gadget, or pair of shoes is worth it, factor in how many times you’ll use it or wear it.
24. Spend on Experiences, Not Things
Putting your money toward purchases like a concert or a picnic in the park — instead of spending it on pricey material objects — gives you more happiness for your buck. The research says so.
25. Shop Solo
Ever have a friend say, “That’s so cute on you! You have to get it!” for everything you try on? Save your socialising for a walk in the park or brunch, instead of a stroll through the mall, and treat shopping with serious attention.
26. Spend on the Real You — Not the Imaginary You
It’s easy to fall into the trap of buying for the person you want to be: chef, professional stylist, triathlete, socialite!
How to Save Right for Retirement
27. Start Saving ASAP
Not next week. Not when you get a raise. Not next year. Today. Because money you put in your retirement fund now will have more time to grow through the power of compound growth.
28. Do Everything Possible Not to Cash Out Your Retirement Account Early
Dipping into your retirement funds early will hurt you many times over. For starters, you’re negating all the hard work you’ve done so far saving — and you’re preventing that money from being invested. Second, you’ll be penalised for an early withdrawal, and those penalties are usually pretty hefty. All these factors make cashing out early a very last resort.
29. Give Money to Get Money
When your employer matches contributions to your retirement account. But you’ll only get that contribution if you contribute first. That’s why it’s called a match, see?
30. When You Get a Raise, Raise Your Retirement Savings, Too
You know how you’ve always told yourself you would save more when you have more? We’re calling you out on that. Every time you get a bump in pay, the first thing you should do is up your automatic transfer to savings, and increase your retirement contributions. It’s just one step in our checklist for starting to save for retirement.
How to Best Build — and Track — Your Credit
31. Review Your Credit Report Regularly — and Keep an Eye on Your Credit Score
A less-than-stellar credit score has the potential to cost you thousands. Be sure to not only check your credit report, but also your actual credit score, they can both tell a different story.
32. Keep Your Credit Use Below 30% of Your Total Available Credit
Otherwise known as your credit utilisation rate, you calculate it by dividing the total amount on all of your credit cards by your total available credit. And if you’re using more than 30% of your available credit, it can ding your credit score.
How to Prepare for Rainy (Financial) Days
33. Make Savings Part of Your Monthly Budget
If you wait to put money aside for when you consistently have enough of a cash cushion available at the end of the month, you’ll never have money to put aside! Instead, make monthly savings into your budget now.
34. Keep Your Savings Out of Your Checking Account
Here’s a universal truth: If you see you have money in your checking account, you will spend it. Period. The fast track to building up savings starts with opening a separate savings account, so it’s less possible to accidentally spend your holiday money on another late-night online shopping spree.
35. Open a Savings Account at a Different Bank Than Where You Have Your Checking Account
If you keep both your accounts at the same bank, it’s easy to transfer money from your savings to your checking. Way too easy. So avoid the problem altogether.
36. Direct Deposit is (Almost) Magic
Why, you ask? Because it makes you feel like the money you shuttle to your savings every month appears out of thin air — even though you know full well it comes from your pay. If the money you allot toward savings never lands in your checking account, you probably won’t miss it — and may even be pleasantly surprised by how much your account grows over time.
37. Consider Switching to a Credit Union
Credit unions aren’t right for everyone, but they could be the place to go for better customer service, kinder loans, and better interest rates on your savings accounts.
38. There Are 5 Types of Financial Emergencies
Hint: A wedding isn’t one of them. Only dip into your emergency savings account if you’ve lost your job, you have a medical emergency, your car breaks down, you have emergency home repair expenses, or you need to travel to a funeral. Otherwise, if you can’t afford it, just say no.
39. You Can Have Too Much Savings
It’s rare, but possible. If you have more than six months’ savings in your emergency account (nine months if you’re self-employed), and you have enough tucked away for your short-term financial goals, then start thinking about investing.