Tested rules of personal finance
We all tend to have a tighter budget before we clock 30.
To feel more in charge of our finances you should follow the simplified rules of personal finance below.
Managing your money takes a lot of work. Because you have competing financial needs, knowing your next step leaves you wondering if you are doing your best to manage your finances.
Kelly F. Crane, the president, and chief investment officer at Napa Valley Wealth Management said, “Typically, our budgets are tighter in our 20s and 30s when we’re establishing our careers, have purchased our first home, have a growing family to support, and often have little savings.”
You can still take control of your finances regardless of your tight budget.
Below are five tested rules for money that you should know;
1. Let your emergency fund take first place.
Celeste Hernandez Revelli, the director of financial planning at eMoney Advisor, advice people to have a special budget for emergency-fund savings instead of hoping they’ll have “leftovers” to stash when they’re done spending.
According to her, you should keep on saving until you have tucked away enough money to run your household for at least three to six months. It will be easier for you if you set up automatic bank transfers after every pay. You do not need to remember.
2. Pay all your bills every month.
Failure to pay all your bills every month may cause debt to grow and skyrocket out of your control. Good spending and saving habits relieve all financial stresses
Crane’s advice for you to stay on top of your bills is: “Only charge what you can pay off at the end of each month.”
If you find yourself wanting to spend irresponsibly, put that money away into a savings account or a designated bill-paying fund instead.
And make sure you pay your bills on time. “Recent studies show that working professionals miss bill payments not because they don’t have the money,” Crane says, “but because they are busy.” Set a digital reminder for when you need to pay your bills so that you never miss a payment.
3. Save for retirement.
When you have 30 to 40 years to go in the workforce, saving toward retirement may not be a priority. But time and the power of compound interest are great assets in building a healthy nest egg.
Revelli recommends saving a solid 15% (or depending on the country you reside and work) of your income each year toward retirement. But, she adds, “anything is better than nothing when it comes to taking advantage of time.” Take advantage of the labor laws that demand companies to pay a pension for their employees. That’ll go a long way toward hitting that 15% target.
4. Get help whenever possible.
Keeping your money healthy and building a secure financial future is a lot of work. So don’t be afraid to get help.
Revelli encourages clients to find a money app that lets you spell out your financial goals and track your progress. Schedule regular meetings with your money to pay bills, check on your debt, and plan with a partner.
Both Crane and Revelli highlight the value a financial professional can provide at this stage of your life.
“Many advisors are adapting how they work with clients and how they charge for services to better fit what millennials may be looking for,” Revelli says.
The right pro can help you attack short-term tasks, plan for long-term dreams, and prioritize the many goals you have for a bright financial future.
Following these rules can help you effectively manage your personal finances. It takes work and dedication, but it’s never too late to start.