Of all the lessons that we learn in school, it seems as though “how to deal with finance” is a class that’s frequently overlooked. That might be one of the reasons why so many people in today’s generation are struggling with debt and other financial difficulties.
Now that we’re finally coming towards the end of the year, it might be a good time to look back over your experiences with money in the months that have passed, and think about what lessons you could potentially learn to guide you into the future. Here, we’re going to look at just some of the things you should keep in mind going forward if you want to improve your chances of long-term success.
Lesson 1: Don’t Spend Your Whole Paycheck
Today, there are countless people around the world that are living from one paycheck to the next, with no financial safety net to catch them if something goes wrong. If you’ve got a particularly low income, then you might think that you have no option but to spend everything you earn, but the truth is that you should constantly be looking for ways to cut back on your expenses.
Try to live off around 90% of your income as a starting point and save the other 10%, this will help to make sure that you’re not left in a dangerous situation if something unexpected happens that causes you to re-assess your finances.
Lesson 2: Know How to Budget
Of course, if you want to make sure that you’re not spending all of your wages each month, then you’ll also need to figure out how to budget efficiently. Although most of us have played around with the idea of a budget, actually sticking to the financial restrictions that you place on yourself is more complicated than it might seem.
Start by taking a pen and piece of paper and writing down everything that you buy for an entire month. That way, you’ll have a good idea of how you’re spending your money, and you should be able to make positive changes by cutting down on the expenses that aren’t absolutely necessary.
Lesson 3: Be Realistic
While it might be tempting to tell yourself that you’re going to save about half of your income every month, the reality is that you’re probably not going to do that well – at least not to begin with. Don’t force yourself to cut all of the fun out of your life when you’re building a budget, otherwise, you’ll simply set yourself up for failure.
When you’re figuring out how much you have to spend, try to leave a little bit of your salary aside, which you can then use for things that you might have forgotten about in your plan.
Lesson 4: Create Some Financial Goals
If you want to accomplish great things with your money, then you’re going to need to think about setting some financial goals. These goals can either be long-term, or short-term depending on your strategy, but a good tip is usually to come up with a few things you want to do soon, and some bigger things that you might want to consider in the long-term.
For instance, a short-term goal might be that you want to go on vacation or get married to your partner, while a long-term goal might be paying off your mortgage or your credit card debt.
Lesson 5: Consider Consolidating your Debt
Debt can easily become an overwhelming force in anyone’s life. Sometimes, when times get hard, it’s all-too-simple to simply let debt pile up on you from countless different locations. Unfortunately, doing this can mean that it’s easier to lose track of what you owe to where, so you’re more likely to miss out on important payments.
A much easier way to manage your expenses could be to consider consolidating your debt. This simply means using a new loan to pay off all your existing debts, so that you only have to pay one repayment each month. Remember, shop around to find the consolidation loan that’s best suited to your needs.
Lesson 6: Have an Emergency Fund
You should always have an emergency or rainy-day fund in your bank that you can fall back on when times get hard. If you don’t, then there’s always a chance that you’ll need to take out a loan just so you can continue to pay off your bills if something else in your life goes wrong.
Try to put at least a small amount of your pay away each month into an emergency fund that will keep you supported if you end up losing your job, or having to pay for a last-minute repair in your house, or on your car.
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