It is not easy to become money smart, it requires a lot of time and discipline and will not happen overnight. A lot of people go through life living paycheck to paycheck and never saving. If you learn to handle your money at a young age, it will certainly put you down the right path. However, if you think you have all the time in the world to be serious about finances, you need to think again. You are young and invincible but when you hit 30, you are halfway to your retirement and this is the truth you must accept. You must put the financial ideas of your 20s behind and become more disciplined and aware of the money you own by mastering these financial habits.
1. Stick to the budget
Preparing a budget and sticking to it are two different things. A lot of you may have played around with the idea of a budget in your 20s but only a few actually stick to it. After you turn 30, you have to ditch the old process of budgeting and start allocating each dollar where it goes. This means if you want to spend $30 a week for your coffee, you need to cut yourself off after the fifth latte. The point of budgeting is to know where the money goes so that you can make smart decisions. Budgeting does not mean you cannot spend money on fun or shopping trips. But the expenses should fit in your budget and should not take you away from the saving goals. Try to document all the spending and make sure you write down how and where you spend and how it affects your budget.
2. Do not spend your entire paycheck
Wealthy individuals in the world did not get where they are today by spending all the money each month. A lot of millionaires spend their income very modestly. You should never spend your entire paycheck and learn to start living off of 90% of the income and save the balance 10%. You can have the money automatically deducted from the paycheck and transferred to the retirement savings account. You can slowly increase the amount you save and reduce the amount from which you live.
3. Set realistic financial goals
You need to sit down and think about your financial goals. Get real about them and envision the age by which you would like to achieve them. Write the goals and set a figure, look at ways you can make them a reality. If you do not have a clear plan, you might never achieve the goal. If you want to buy a house, set an amount aside and have a plan on how you can turn the goal into a reality. Learn about how a mortgage and reverse mortgage works, interest payments, how much you can afford, and other costs associated with the purchase. Use the reverse mortgage calculator (https://reverse.mortgage/calculator) to get an idea of how it can make a difference to your finances. Do your research and then take the right steps. It is true for any other financial goals like paying off the debt or taking a luxurious holiday.
4. Understand your debt situation
A lot of us pay attention to our debt only after we hit the 30s. But debt should not become a way of life. Some also view it as normal and this is not right. You do not need to live your life paying off debt and thinking it is the right way to do it. Assess the debt you have outside of the mortgage and set a budget that will avoid taking more debt. There are several ways you can eliminate debt but paying the minimum amount for all the debts works the best. Keep the smallest one aside and pay the minimum on the debts. The idea is to get the small debts paid off in a few months and then move to the next debt. It could be tempting to see low balances on the credit card and think it is okay to begin spending again. It will only lead to more debt. You need to understand self-control and keep credit card usage at a minimum.
5. Set up an emergency fund
If you want sound finances, you need to have an emergency fund. If you do not have one, you will dip into the savings in case of emergencies. You can start building an emergency fund at as low as $1,000. Set incremental goals for yourself based on your expenses and have at least three monthsof the living expenses in your fund.
6. Invest in Developing new Skills
Workers are always expected to grow in their careers. So whether you’re a total newbie to the workforce or an experienced professional, it’s always helpful to have new skills to bolster your resume and give you more options for future employment. Once upon a time, gaining additional education meant going back to school full-time for several years. But with the rise of online colleges offering accredited certificates and degrees like online PMHNP programs such as the one offered by Wilkes, people can now acquire valuable knowledge without disrupting their work schedules too much.
Understand the impact of budget on your finances and then make the spending decisions. Take these steps at the earliest and ensure you have the finances sorted in your 30s.