7 Top Money Tips

THE BACKGROUND:

Despite taking math in school, majority of us never learned much about financial planning. While many can tell the base 10 logarithm of 1,000, they weren’t taught how to set up a good budget.

Thankfully, today’s post conatains a list of 7 Top Money Tips for the next generation. It’s a great guideline that simplifies the big money issues and makes creating a plan for yourself less overwhelming.

Earn a decent living.

Research has shown that earning more than you need to live comfortably (e.g., paying for rent/mortgage, transportation, groceries, and the occasional vacation) actually doesn’t increase your happiness. But earning less than you need to live comfortably will make you stressed and even unhappy.

Create a budget to ensure that you’re spending less than you make.

Go over your monthly spending to find savings. Ask your wireless and cable providers to “audit” your bills. Contact insurers about discounts and raising your deductibles. Cancel subscription services you’re not really using. Often, just tracking your spending can save you a lot of money.

Plan to eliminate high-rate debts (and chip away at lower-rate, long-term ones).

The fastest, cheapest way out of debt is to put all your extra cash toward paying off those with the highest interest rates, while making minimum payments on the rest. Refinancing your mortgage, student loans, and car loans—and transferring credit card balances to lower-rate cards—can speed the process.

Start an emergency fund.

Nothing derails your finances quicker than an emergency. Two-income households should aim to put away three to six months of living expenses; one-income households need to double that. Consider putting this money into a savings or money market account, where you can access it, without penalty, if and when you need it.

Assess your investment approach at least once a year.

Invest any money you’re not planning on using for at least three years in a diversified portfolio. Choose investments based on your age and risk tolerance, and rebalance twice a year. Or, take the easier road—invest your money in a target-date retirement fund in line with your approximate retirement year.

Make investing a continuing priority.

Timing the market rarely works. What does is investing regularly. Then every year, assess your progress. By age 35, you should have put away 1x your current salary. By 45, 3x. By 55, 5x. And by 67, 10x.

Schedule a repeat performance next year.

Just as you go to the doctor every year for a physical, you should sit down annually and go over the items on this list. It’s a good time to think about what you want your money to do for you this year, in 5 years, and in 10 years. You’ll be surprised at how good tracking your progress will make you feel!

THE BOTTOM LINE:

Use these tips to help create a plan for managing your money. If you already have one, even better—this list can help you make sure you didn’t leave anything out.

 

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