Growing up, we have little access to financial tips and information. Teaching children tricks on money management and personal finance is the cornerstone of healthy financial education. They are unlikely to think for themselves how important knowing different things about personal finance is. They are aware they have to learn such notions and concepts at one point, but now fully aware of why, and how they will use that information in the future. The lack of financial education early in life reflects when the adult becomes unable to make wise financial decisions, and is clueless about basic financial matters. Ignorance will take them to an endless pit of bad financial decisions.
For those who didn’t enjoy proper financial education early in life, we have a small guide to help them prevent further bad financial decisions.
Be wise about your expenses
When thinking about your money management journey, getting started is the hardest part. Saving money and learning more about personal finance is mostly about limiting your expenses. If your main goal is to reach financial stability and later, freedom, specialists recommend starting your journey early in life.
In the UK, over 25% of adults have little to no savings, according to a series of studies and publications. But we can see similar patterns in most parts of the world. People live pay check to pay check for years.
Saving money starts easy, with a simple budget plan. You will know exactly how much can spend over a period, depending on how much you make.
For beginners, personal finance experts recommend by making monthly budget plans and working around them. Regardless of how much you make a month, have a plan of how you spend each dollar. To achieve higher financial independence, spending less than you make is the goal. Think of how you can change your lifestyle to lower your expenses.
- Housing – think of how much money you spend on housing and if you can reduce these expenses. For instance, you could move back with your parents until you make enough to move on your own without making extreme financial efforts. Alternatively, you can get a roommate to split your rent and utility expenses.
- Meals – when you think you can’t reduce your expenses, you’re not seeing the big picture. Most people spend big chunks of their income on restaurant meals. Obviously, home-cooked meals are far more affordable and calorie-dense, meaning you will spend less money from your monthly income on meals.
- Transportation – think how much you spend on transportation monthly and see if you can reduce those expenses. For instance, if you use services like Lyft and Uber, give those up. Public transportation usually costs less, and it’s convenient enough for regular use.
- Credit card interest rates – avoid using your credit cards as much as possible, at least until you get your finances in order. Credit card interest rates are not something you look forward, especially when you’re trying to save money.
Pay off high-interest debts
Once you lower your monthly expenses and save more, you can consider paying off your high-interest debts. Credit cards and payday loans are the worst enemies of your personal finances. Everything with interest rates higher than 8% is considered a high-interest debt.
You want to take care of this debt because your balances will grow at the same rate as your interest rate. Only think: most credit cards have interest rates ranging between 15% and 25% per year. Even if you don’t spend money, the balance will continue to grow dramatically.
Obviously, this step shouldn’t include high debts like mortgage debt. If you make a goal of paying them off before saving money, you will delay the money-saving step a lot. This is a counter-productive decision you can make.
Remember to make the minimum payments on moderate interest debts. This will keep your credit score at solid levels. Even if it takes significantly longer to pay off this type of debt, financial stability and, ultimately, freedom, is a lengthy journey. Commit to it!
A thing most people don’t seem to understand is the fact that money saving and good money management doesn’t exclude investing. In fact, personal finance experts recommend investing as soon as you reach higher levels of financial freedom. Wise investments can beef up your savings accounts, and can help you reach full financial independence earlier than planned. But be wise when choosing what to invest in.
Recently, more Millennials choose foreign currency exchange trading as their preferred investment method. It’s a relatively easy to grasp investment method, plus you can enjoy countless online educational resources to perfect your trading skills. There are several challenges you must overcome when first starting your Forex trading journey. One of the biggest challenges faced by rookie traders is choosing the right broker.
Search for banks and brokers that allow high amounts of leverage. This will make it possible for you to control large positions with relatively low starting amounts. Some of the best high leverage brokers offer generous leverages, which can act to your advantage when you want to start with little money.
The best part about forex investments? The Forex market operates 24 hours daily, five days a week!
Save for your bigger financial goals
Once your investments generate more money, you can think about your bigger financial goals. You can save for your own home, your kid’s college tuition, even paying off your mortgage early! Now you can also start dream about vacations and new experiences. You’ve earned it!
Healthy financial education starts early in life. If you didn’t receive it as you should have, it’s never too late to pay attention to your spending habits, your goals, and investment ideals.
Financial freedom doesn’t mean restricting your expenses and becoming extremely frugal. It only means you have to learn how money and finances work in detail.