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6 Financial Habits that will change your Financial Life

Financial Planning Tips


Financial tips

Top 6 Personal Finance habits you Won’t Learn in School/College. What did you learn about personal financein college? Credit? Investing? Money Management? Or did you only take the courses that were mandatory for you to graduate? Well, for most people these classes were more or less pointless, just like calculus, astronomy and anthropology. The longer I’ve been out of college, the more disappointed I am about how much information was not included through out my studies. The world tells us to go get educated, get a job and all will be well. But, unfortunately, it’s not that simple! For you to succeed in the world you need toknow a lot more about money than what school/college will ever give you. Personal Finance forms the backbone for all success stories. To save you from the hustle and bustle of having to learn from your mistakes.


1, Buying Your First Home.


You have probably heard of the popular statement, ‘If you want to buy a home you have to save up to 20% of the value for down payment.’ If you don’t you will be forced to pay private mortgage insurance, which could really dent your account. What you won’t learn in school/college is that whilehigher mortgage payments may be painful, the financial trade-off between paying more money now and waiting to save up the 20% deposit could be worth while. When we look at macro economic factors in the US over the past decade, the appreciation rate of real estate has really gone up but the wage levels have remained stagnant. So it makes it unrealistic to start savingup 20% of the home value as it will only increase drastically over the years. The rule behind this is; if you have the capacityto save the money within at least five years comfortably, then go for it. But, if it will take you longer, you’llbe chasing a moving target as the prices increase.


2, Save In School / College.


They will teach you to save atleast 10% of your income. But, let’s be honest here, this isn’t enough to retire on. Well, unless you are earning millions. For most of us with a regular paycheck, adecent savings percentage will be about 25 - 40%. We’re not saying 10% is entirely useless,it could be a great starting pint to build that savings muscle. In order to save more, reduce your expenses and unnecessary costs. Instead of buying that cup of coffee everymorning, put that money in a savings account with a better interest rate.


3, Emergency Fund.


You may have never heard of an emergency fund from school / college. But, you’re lucky you have us to teach you about it. Recent statistics show that up to 40% of Americans don’t have the funds to cover an emergency of $400. This is an alarming statistic that only shows how people disregard the importance of an emergency fund. What if you lost your job today? Would you have enough money to cover yourcosts? The golden rule is to have six months of expenses costs saved up somewhere, but, we suggest that if you can make it more, the better.


4, Budgeting Basics.


Budgeting is quite important in life, yet you won’t hear anything about it in school. Sadly, not understanding the basics of budgeting while in school can leave you disadvantaged right after graduating, especially once youmove out. Not having knowledge of how to manage bills, and create the distinction between wants and needs can lead to one enduring one hardship after the other. Everyone needs to know how to plan a lifestyle that is financed by earned income. This includes understanding how to plan for all bills but still ensuring there’s enough left for necessities such as groceries and savings. But, let’s face it as much as budgeting is important, no one really likes tracking every single penny they use. What you can do instead is what we refer toas tactical budgeting. This involves creating budgets and plans overa long period of time.

Example:- 

You can identify what you need every month and create a budget with the needs, wants and respective costs over the next sixmonths. From the plan created you can then separatethe amounts into different accounts to ensure you don’t spend beyond your budget. Then occasionally you can refer to your listto stay on track.


5, Compound - Interest.


The power of compound interest is possibly the best-kept secret. The one thing every young people have as an advantage over everyone else is time. While they may not achieve their financialgoals instantly, they have an upper hand when it comes to investing. All they need to do is tap into the powers of compound interest. By setting aside small chunks of money ina high-interest account, young people can amass great wealth that will compound overand over again through the years. To show you just how important compound interestis here’s a great.

Example:- 

If someone gave you two options the firstchoice a three thousand dollars and the second a penny that doubles up in value every otherday. Most people would choose the first choice,right? You probably did too... But if you do the math, the second choicewould be worth $10 million after 30 days only! If that’s not enough to convince you to start taking advantage of this incredible opportunity to grow your wealth, then I don’tknow what will.


6, Rules of Insurance.


If there’s anyone who is depending on you financially then you need to get life insurance. This could be your child, spouse or parent. It is better to get a term policy rather thana life one as you get coverage whenever the need arises. However, if no one depends on you financially end the policy to save on money. In addition to life insurance, get insurancefor other aspects and assets you own. This includes your car, home, expensive assets,and health. You can also get umbrella insurance whichcovers different policies and guarantees a discount if obtained from one insurer. Take your time to get different rates and the features available before choosing a company to insure with. 

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