Top Rules to Follow for Healthy Finances
If you are interested in creating genuine wealth, as opposed to just surviving from month to month, here are some tips that could make all the difference when it comes to looking after your finances in the long run.
1. Pay off your debt
There is such a thing as good debt and bad debt. Good debt could be a student loan, or mortgage on a property, and bad debt could be classified as a credit card, or clothing accounts. However, at some point in life, all debt becomes bad debt when you allow it to mound up. There are so many benefits in clearing your name of debt such as warding off those pesky interest fees. All interest paid on debt is money you could be spending elsewhere. Therefore the more you pay off, the more money you will have to spend in the long run. As a first step, try to work out exactly how much you owe, and exactly who you owe it to. Try to keep track of your creditors, the total amount owing, your monthly payments and deadlines by creating a simple spreadsheet showing this information. You could even find an app on your phone to assist you in keeping track. You could even speak with a debt counsellor to help you stay on track.
2. Grow an emergency fund
An emergency fund is not just a short-term financial goal to help in a sudden crisis. Although they may assist you with a sudden medical expense, a burst geyser or even a vehicle repair, your emergency fund could do so much more for you. Imagine having the funds to purchase needed furniture or equipment for a home business as opposed to taking out a loan in order to achieve this? Some examples to increase your emergency fund could be to pay part of your bonus money, or any income that may surprise you. If you are fortunate to receive a salary increase, try to increase your contributions to your emergency fund. Also, make sure you keep this money in an account that is easily accessible and offers you the best growth in investment returns. Consult with a financial planner for the best options, with the least risk.
3. Live within your means
In order to create wealth, your expenses should never exceed your income. A budget is vital in achieving this. However, you also really need to stick to the budget, come what may. Again, you can find wonderful apps online to assist you with this. If however, you still are unable to cut your expenses, perhaps you need to investigate the option of another stream of income.
4. Find another source of income
It is always great, if possible, to have another stream of income, besides your primary salary / income. It could be greatly beneficial should anything happen and you were to lose your main income stream. Extra income can assist you with living within your means, especially when your expenses surpass that of your primary income. Additional income could also help in settling additional, unexpected expenses without going into debt. Some ideas to create additional income could be selling baked goods, jewellery, doing online writing or assisting others with their administration on your time off.
5. Start thinking about retirement
You’ve probably heard this all before, but it remains true. The sooner you begin the bigger the growth potential of your retirement savings. If you were to begin at the age of 25, and began to invest at a return of 12%, by the time you were 55, you’d have saved a pretty penny. However starting at the age of 30 with the same amount could give you half of that amount. That’s right – half! Also, if for some reason you are forced to enter an early retirement due to poor health for example, you can rest assured knowing that you have a nest egg to rely on.
6. Stop Buying
Almost everyone has a weakness for something materialistic. Whether it be handbags, shoes, or even stationery, these items can become a financial parasite. Often this is something that we really like and believe we will use, even if currently you do not have a requirement for it. These weaknesses could often take a fair chunk of our income or savings, that often just lay around redundant to us. Try to make a concerted effort to stop such habits and see how your wealth grows albeit slowly but surely.
7. Take care of your family
Have you taken into consideration of what would happen to your family or other financially dependants when you can no longer work, or if, heaven forbid, you had to pass away? It is vitally essential that you have a will. You could speak to a professional to assist you in this regard, but so long as it is in writing, signed by you, and witnessed by two people, your will is considered valid. A professional lawyer, financial advisor or accountant could help you with life cover and disability cover, as well as to guide you in making sure it is drawn up in such a way that it can be easily settled.
By making some (or even just one) of these changes, you could gaining financial freedom, without having to live from paycheque to paycheque.
