Financial Goals and Tips That You Should Know
Financial Goals and Tips That You Should Know
The world is currently undergoing a massive recession. Millions of people have lost their livelihoods, businesses have closed, and countries are racking up debt. It may take a long while for things to go back to normal.
Due to the ongoing global economic crisis, more people are starting to pay closer attention to their finances. They have been forced to take a step back and really think about how they manage money. This is now affecting people’s spending habits and how they will use their money in the future.
The Importance of Personal Finance
Most people, especially young professionals, do not think about savings and retirement funds until it is too late. They spend like crazy and spend their money on unnecessary things without considering their future. If you do not want to work forever, you have to start taking care of your finances.
Take a look at some of these financial goals and tips. You might be able to apply some of these to your own life.
Build an Emergency Fund
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Less than half of Americans have enough money in their savings account to pay for a $1,000 emergency. This is a problem because if you do not have savings, you are more likely to take out loans. You are also probably going to use your credit card which you might not be able to pay off. Not having an emergency fund is just a huge no-no.
Start building your emergency fund even if you only put a small percentage of your paycheck into it. Saving some money is better than saving nothing. Ideally, you should have at least three months worth of expenses saved up. This will get you through small bumps like sudden job loss.
Once you have saved up three months’ worth, increase your fund to six months. Try to keep putting money into your emergency fund until you have enough to cover you for a whole year. In a situation like a pandemic, one to three years’ worth of savings will help you pull through. Having an emergency fund is the difference between surviving and starving during an economic crisis.
Track Your Expenses
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Have you ever wondered why your money seems to disappear every month? You know you made money, but your bank account is low and you do not know where the money goes. If you experience this frequently, you should really consider tracking your expenses.
You can do it old-school and simply write down everything you spend money on in a little notebook. There are a ton of finance apps that will do this for you, though. If you decide to do this, you have to track every expense, no matter how small. The little expenses here and there do add up.
Writing down your expenses will help you filter out what unnecessary things you can cut out. For instance, you find out that you spend way too much on coffee on the way to work. To cut back, you can either stop drinking coffee or make your own at home.
Open a High-Interest Savings Account
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Parking your money in a savings account is a smart idea. However, parking it in a high-interest savings account is an even better idea. Most savings accounts under traditional banks have extremely low interest rates. The average interest rate is 0.06%, which is basically nothing.
To keep up with inflation, look into banks that offer an interest rate of at least 2 to 3%. Online banks usually offer high interest rates since they do not have to pay overhead fees. They are able to afford the higher rate.
Use Credit Cards Wisely
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Contrary to popular belief, credit cards are not the devil. In fact, credit cards can actually save you money if you know how to use them. You can get cash back, reward points, and travel miles by using credit cards for your purchases. However, you can also bury yourself in debt with credit cards.
The key to using credit cards wisely is to avoid using it for things you cannot afford. If you cannot pay for something with cash or a debit card, do not use your credit card instead. Only spend within your means.
Take Up A No-Buy Challenge
If you are a shopaholic or an impulsive spender, you might need to take more drastic measures. Consider doing a no-buy challenge for a few months.
Before you start this challenge, make a list first. Take note of non-essentials you spend a lot of money on that you can live without. For example, you could stop buying new shoes or cigarettes, or cancel that gym membership you never use. Set a time frame for your challenge, and stick to it.
Do More DIY Projects
You would be surprised by how cheap things can be if you do them yourself. Instead of hiring a plumber, unclog your sink yourself. If your car is broken, try to figure out the problem and fix it on your own.
There are tons of resources out there, including YouTube tutorials, that will teach you how to do these things. It may take more time and effort, but you will save a few hundred bucks.
Grow Your Money Through Investments
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Saving your money is all well and good, but investing your money is how you will build wealth. There is no one way to invest. In fact, there are many different investment options.
You can go the traditional route to be a little more on the safe side. This would entail investing in the stock market, mutual funds, time deposits, and treasury bonds. While there is, of course, some element of risk, you are more likely to win with these investment options.
If you do not mind risk, you can go down the route of alternative investments. Cryptocurrency is a hot commodity, and more people are investing in Bitcoin and Ethereum. You could also invest in hedge funds or go into venture capital. Aside from these, collectibles like artwork, vintage cars, and designer handbags are considered investments as well.
Do not feel bad if you do not have any savings or investments yet. It is never too late to start. The most important thing is that you recognize you need to be responsible, and you are willing to take action. Take that first step, build good habits, and you will be on your way to financial freedom in no time.
