When you are young you often don’t think about money, you live pay-check to pay-check, often barely able to make it. But starting your smart money habits early is the best way to make sure you can become wealthy, maybe even a millionaire.
1. Learn to spend wisely – Spend less than you make, and have some left over at the end of the month. If you can learn this simple #1 most important rule, your financial life will be oh, so much better for it. A lot of people are like me have trouble budgeting, so use a tracker to get a handle on your spending. A great way to keep an eye on your money is by using a tool like Mint.com to track your spending. Just put your accounts in and within a couple of months you will have a good idea where your money goes. If too much is going out, then pick what areas to cut back on. Just remember to enjoy life and not be a Scrooge.
2. Build an emergency fund – That’s right, stuff happens, and it happens a lot. So set some extra money aside each paycheck and build up an “oh, crap” fund of at least 3 months worth of expenses. But hey, 3 months worth may seem like a lot so start out with as little as $20 and slowly build up to $1000, then 3 months of expenses. Keep $500-$1000 in a bank where you can get to it by an ATM and you can’t go wrong.
3. Save for financial independence – Some day we all want to just stop working and do ever whatever we want. You have to save some of your money to do this so keep in mind if you are saving 10% of each paycheck you will have to work 51 years before you can stop. Welcome to the old age wealth factory, Gramps. You know you want to stop working sooner than that so let’s start saving some more. 20% will knock it down to 37 working years and 30% down to 28 years of hard labor. To knock it down to less than 20 years you will have to save about 45% of your take home. But hey, if you can stop working before 40 and enjoy the rest of your life doing the things you love, why the heck not. Do it.
4. Set financial goals – If you’re not aiming for something, how will you know you got there? Set some goals now. Sure saving for retirement is great but it is a long way off. You need some goals you can work toward now. Set some goals like savings for a new bike, a vacation, a new home, etc… Make them things that you enjoy and are willing to work towards.
5. Consider buying life insurance – You didn’t think I could leave out life insurance did you? Buy it young, and it’s on sale. The younger and healthier you are the cheaper your insurance will be. Also, there are a lot of lifetime benefits from some kinds of life insurance policies, like decreased taxes, being able to access extra money, and much more. Talk with your insurance professional about all the benefits.
6. Earn more – Hustle on the side, or get a raise. That’s right I’m telling you, you’re not working enough. What 40 hours is not enough? Well if you are not making enough to save about 40% of your take home then, no you aren’t making enough. Find out how to hustle, and you will have a huge leg up for your financial life.
Don’t just take my word for it.
Forbes just released an article on 5 Get Ahead Money Habits you Shouldn’t Put Off and they are so right.
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