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This content is for informational purposes only and is not intended to provide financial advice.
Financial literacy is life-changing. Although financial management is not taught in school, you should educate yourself about personal finance to achieve your financial goals. Learning how to manage your money is easier than you think. Here are ten simple tips to help you build wealth and stay on top of your finances.
1. Set Financial Goals
Financial goals are specific milestones that you want to achieve. They are important because they give you a purpose to manage your money and keep you motivated on your personal finance journey. These goals can be short-term such as saving for a vacation, medium-term such as accumulating a property deposit, or long-term such as saving for your future child’s university education.
2. Create a Budget
Once you have a financial goal, you can design a budget. It is easy to live beyond your means if you have no concept of your expenditure. Breaking down your spending into basic categories will help you to cut out unnecessary expenses and get a handle on your finances. Your weekly or monthly budget should include a maximum ceiling in each expense category and a fixed amount that goes towards your savings.
3. Save for Emergencies
Accidents happen and you cannot predict when you will need to repair your vehicle or seek medical care. To avoid incurring a large amount of debt or interest when you need to address an urgent situation, you should build an emergency fund. Your emergency fund should live in a separate savings account, preferably one with an attractive interest rate. Try to set aside at least three months of basic living expenses.
4. Pay On Time
Paying your bills on time may seem straightforward. However, we often get distracted by our hectic lifestyles and let our bill payments lapse. Late bill payments can lead to penalties that add up over time and affect your credit score. The same applies to credit card payments. It can be tempting to only pay the interest, but it is ideal to pay off as much of the principal balance as possible since credit card interest can balloon quickly into considerable debt.
5. Start Saving Early
Retirement rarely features in the financial goals of young people because it seems a lifetime away. That said, the earlier you start to save, the more possible it will be to achieve your target retirement sum without stress. You can start with a small sum and increase the amount as you become more financially stable. In addition, your seemingly modest savings will accrue compound interest over the years to grow into a larger sum.
6. Invest Wisely
If you have finances to spare, investing may offer better potential returns than a conventional savings account. There are a range of investment options, from real estate to forex trading, that vary in terms of risk and prospects. It is recommended that you invest only after you have done your due diligence in research. Choose an investment path with a timeline that fits in with your financial goals and a level of risk that you are comfortable with.
7. Seek Advice
Expert third-party advice can help you to see the big picture and gain another perspective on your situation. A financial advisor or a trusted friend with a firm grip on their personal finances can guide you on the latest outlook and the next steps to take. Be sure to seek advice from people who have a proven track record of financial success instead of somebody who promises overnight profit.
8. Get Insured
Aside from an emergency fund, it is prudent to purchase insurance. Aside from the typical health and car insurance policies, other insurance policies can protect you and your family in unforeseen circumstances. For instance, property and contents insurance will cover your home and belongings in case of a burglary or fire. Similarly, disability insurance can guarantee your income in the event that you are unable to work as before.
9. Choose the Right Bank
The bank that you use can have a significant impact on the way that your savings work for you. Select a bank that best meets your needs. Traditional banks are generally the most accessible, with numerous physical locations and ATMs. Credit union banks are smaller in scale but can offer better interest rates and lower fees. Online banks have no physical locations and typically offer the highest interest rates and the least fees.
10. Keep Learning
The financial landscape is constantly evolving. The economy rises and falls and the range of available financial management services and products change along with it. Keep abreast of developments in the field by subscribing to publications such as Forbes and Insider. You can also take an online course or read personal blogs by finance experts to improve your knowledge. When you understand the fundamentals of personal finance, you will be able to manage your money and achieve your financial goals.
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