Looking to get on the right track with your money? Here are 10 personal finance tips to help you change the way you think about money.
Understand your net worth
It’s a simple calculation, just subtract your liabilities (what you owe) from your assets (what you own). Hopefully when you add everything up and subtract liabilities from assets you have a positive number, reflecting a positive net worth.
If you end up with a negative net worth, your goal should be to pay down debt and boost savings to help you bring your net worth above zero.
Create a budget
Depending on if you are planning for retirement, saving for a new car, or trying to pay down your debt, you need to have a plan.
Balancing basic costs such as rent, utilities, transportation, and groceries is a necessary task, so you can understand how much money is going out vs. coming in.
Pay down debt or invest extra cash?
If you can earn more return on your money by investing it than the interest your debts are costing you, then it makes sense to invest.
However, the biggest thing you want to also understand is that the historical record of equity market returns. Equities usually deliver 5% to 7% market returns, not 15% to 30%.
Therefore, if the interest rate on any debt you hold is greater than 6%, you should pay it back.
Download an app to help manage your finances
Some of apps are simple in that track your spending and report back to you what comes in and what is going out.
Other apps are more complex in that they will help track and manage bank accounts, credit cards, loans, investments, and other financial accounts. Take a look in your favorite app store and try a few out.
Live within your means
You may have heard it a thousand times before, but living within your means is one of the most important steps towards financial success.
Many people have gotten used to living from paycheck to paycheck and fail to adjust their lifestyle according to their income.
Many people in America depend on Social Security for their retirement. Social Security may cover only 40% of your previous income.
Can you imagine living with 40% of what you earn now? Take advantage of 401(k) and other saving option plans your employer may offer.
Consider contributing as much as possible to be fully matched by your employer.
When is the right time to retire?
You may be trying to figure out what the most beneficial age is to say goodbye to your colleagues at work. Is it 62, 65, or even 70?
Unless you have been stashing away cash into your retirement plans or have a current health condition that might shorten your longevity, you might be working for a few more years than initially anticipated.
Relocate to a state that has fewer taxes
Aside from federal taxes, every U.S. state determines its own tax rates for income taxes, property taxes, and sales taxes.
Currently, eight states do not have an income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Enjoy life and spend on experiences than materialistic things
Put your money toward purchases like an activity like a theme park, sporting event, concert, or a vacation instead of spending it on pricey material objects.
This will give you more happiness in the long term instead of trying to keep up with the Jones.
Finally, love thy self
Appreciate the fact that you a personally taking charge of your finances and treat it like any other fitness or diet goal. Overcoming financial challenges in your life and taking charge of planning and being disciplined is a huge success.