Nowadays, money is everything; it pays the bills, secures a future, and makes life more comfortable. But, if we want to live the dream and never stress about finances, we need to know how to manage them.
Of course, if you are in a pinch and need quick cash, you may feel smart taking out payday loans because they’re so easy to get — but they’re an extremely expensive option that should only be used as a last resort. After all, there’s a very good chance the money you borrow will end up costing you double by the time you pay everything back. So, what can we do?
A huge percentage of people, mainly the younger population, are worried they can’t manage their finances. Many of them claim they are not good with money.
In fact, just 30% of American households have a sustainable financial plan. Plus, most of them spend more than 10% of their entire income on food, statistics show. If you want to put an end to your financial struggles, here is how you can do it.
Set a Budget Limit. Keep the money organized and keep track of everywhere it goes. Organize the expenses based on categories like food, transportation, savings, education, bills, and utilities. Dedicate 20% of the income on financial priorities like debt and bills. 30% should go to lifestyle spending, anything that is not necessities. Tracking habitual spending will help highlight any weaknesses and show where it’s possible to make an improvement. Use the money wisely and don’t go over the budget limit.
Always Have Savings. It’s impossible to predict the future; that’s why we need to set money aside. They will become a safety net in case anything happens. Teach your children to do the same, so they can also create something for their future.
Invest in Life Insurance at an Early Age. The sooner you get life insurance, the better. When we are younger, the rates are much cheaper. Even if our personal health changes drastically, we can still make the most of our insurance policy.
Don’t Underestimate Credit Cards. Most people think credit cards let them buy whatever they want. But, the truth is they plunge you in a sticky web of debt more than you realize. For people who can’t control their impulse spending, it’s best to pay in cash instead. When we physically hold the money, we realize how much we are actually spending, so we can manage our finances better.
Don’t Be Ashamed to Ask for Help. Making the right investment decisions and planning out the funding is not easy. That’s where a financial planner can come in handy. They can give a professional insight on all the risks and benefits so that we can keep track of our budget. This is an excellent long-term strategy.
Conclusion
Taking the time to manage the finances will pay off. Not only will you stop the unnecessary spending, but you will also secure a future with some extra savings. The more you save, the easier it will be to go on a holiday, take care of emergencies, and even buy a car.
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I’d agree with all your advice except ‘invest’ in life insurance.
Life insurance is a lousy investment at best. Buy it just like any other insurance….for the term you need it to protect income WHEN that income would be needed for those left behind…..that is the ONLY purpose of life insurance for most people. And buy PLENTY.
Sold as ‘investment’, with a lousy savings plan attached, most buy way too little because of the expense. Buy cheap term insurance WHEN you need it, and keep your savings as far away from an insurance company as possible.
I don’t have insurance on a car I sold or a house I owned 20 years ago because there is no need. And I don’t have life insurance at my age because no one will miss my little income, and because of plenty of savings, I’m self insured.
Agree with whole life insurance being a lousy investment, Andy. I do think buying term life as early as you can is a smart idea, however — it’s especially important if you are in a household with a high-earning lone breadwinner. That was my situation, and I wanted to cushion my family from any terrible financial shocks in the event I passed away prematurely. Fortunately, I purchased my term life policy in my late 20s, and as a result the premium I’ve been paying for all these years has been really cheap.
All life insurance costs more with each year one ages. Insurance companies sell various types of policies to make that fact easier to sell a policy, but one does need to understand that fact to start with, and figure out IF the way the policy is set up is to the buyer’s advantage or the insurance company’s advantage.
“Cash value” policies (whole life, universal life, etc) are basically a combination of decreasing term insurance and an increasing internal savings account. Each year that goes by, the policy holder is getting less actual insurance coverage and more of the face value is their own money. The problem with these policies multifold: You don’t know the cost of insurance due to the bundling, the rate of return is very low on the savings portion, and due to HAVING a savings portion, the face amount of the policy is too low to do the actual job of life insurance….which is protect income if that income would be missed. (That last part should be in bold type !)
Term policies (pure insurance) are sold in many forms. Annual, renewable term is a policy that starts off cheap when young (low risk of death) and increases in cost each year as you approach age 100. The face amount (the amount the company pays on death) stays the same, but the cost of the policy increases each year. The policies are usually guaranteed renewable as long as you pay the increasing cost, so if your health changes for the worse, they can’t drop you.
Decreasing term has a level cost per year, but the amount of payout decreases each year.
“Level” term is most often sold…..the period is often 20 years or so, and they simply average the cost insurance over a fixed period of time to keep the cost level…..you overpay somewhat in early years to under pay in later years. This is the most popular form of term designed to cover a young family with a high amount of coverage for the average period a family needs the coverage. After the kids are grown/gone, the coverage is usually lowered significantly due to the next 20yr period going up a lot in cost OR dropped all together if not needed…..the husband/wife have built up enough savings that the loss of income of one would not be a crushing blow to the other.
Anyone buying life insurance needs to have a full education ON life insurance and make sure they first have a need for it, second, that they are buying enough coverage, and third, have an exit plan.
The one primary caveat is:
IF your life insurance has a saving plan connected with it, you bought the wrong kind, likely too little of it, and most likely for the wrong reasons.
Agreed, Andy.