- Learn From Your Parents’ Financial Mistakes. You learned a lot from your parents, like how to tie your shoe, what it means to have good manners, how to drive. But did you also pick up a few bad money habits from your parents and think it was how everyone else managed their money? Maybe you’ve already made some money mistakes on your own, but chances are good that you can learn several good financial lessons from your parent’s mistakes without making them yourself.
- Wean Yourself Off Investment Risk When You Reach Retirement Age. When you’re young, you can afford to take on more risk investing in the stock market. When you’re decades away from retiring, you (and your money) can withstand the market’s ups and downs, mainly because you’ve got time to bounce back. When you get closer to retirement, when you need the money you’ve invested, you can’t be as risky with your investments as you were when you were young.
When the stock market started to crash towards the end of the early aughts, investors between the ages of 56 and 65 who still had more than 90 percent of their 401(k) invested in the market saw a considerable loss. Tweak your portfolio every decade or so so it’s balanced according to your age and the level of risk you can take on.
- Learn How To Use Credit Cards the Right Way. Rather than whip out your credit card for a so-called unbeatable deal you didn’t budget for or a group dinner, learn how to use credit rather than allow credit to use you, like your parents may have done. When it comes to a credit card, you want to focus more on what it can do for you for free, such as give you cash back or score airline miles. Whenever you use your card, try your absolute best to pay the balance off at the end of the month so you aren’t wasting money, which a Michigan bankruptcy lawyer will gladly tell you. While your mom and dad may wade in credit card debt rather than drown in it, it’s still a debt they have to pay. Being responsible with credit is a great way to improve your credit score, making it easier for you to secure a good loan with a low interest rate for those times when you may need to take on good debt, such as getting a college education.
- Understand How To Best Maximize Your Money. Your parents may have winged it when it came to their finances, trying this and that until something worked. Sort of. Rather than follow in their fumbling footsteps, broaden your understanding of money and financial health. For instance, are you intimidated by the stock market because you never had anyone break down how it works? Were you never taught how to create a budget and stick to it? This lack of ignorance can seriously cost you.
Take a financial course to help you develop healthy money habits and a healthy relationship with money. The internet is filled with free sites, videos, apps, and more that you can put to good use. Don’t let a lack of knowledge stand in the way of your spending, saving, and investing better than you currently are or your parents did.
- Teach Your Kids. Maybe you have kids of your own. If so, be sure you instill in them proper financial habits. It’s never too early for them to start learning. By teaching them how to handle money when they’re young, you’re less likely to have to bail them out when they run into financial trouble because of a lack of knowledge, knowledge you could have taught them. Don’t let the ugly financial cycle go on longer than necessary.
Money is a delicate subject, one not every parent is willing to talk about with their children. As you grew up, you likely developed an idea of which money lessons your parents failed to learn. Make sure the same doesn’t happen to you if you have the chance to avoid becoming a cautionary tale.
Note: this post contains contributed content.