Whether a millennial, Gen-Xer or baby boomer, it’s never too late to sharpen your money management skills.
April is National Financial Literacy Month, so it’s the perfect time to brush up on fundamentals of personal finance.
Below are a few important money lessons to help prepare for a successful financial future.
<KNOW WHERE YOUR MONEY GOES
To get a snapshot of where your hard-earned money is being spent, keep track of all your expenses for a month. This includes analyzing your paycheck to understand how much is taken out for taxes, what goes to Social Security and how much goes to your 401k.
One easy way to do this is to look at a paper copy of your pay stub and create a list of expenses, including everything from your mortgage to your Friday night pizza. This will allow you to clearly see the dollars coming in and going out, rather than simply having your money direct-deposited into your bank account and swiping your debit card blindly throughout the month.
Once you know where you are spending your money, create a budget which, of course, should include a category for savings.
<MAKE SAVING AND INVESTING A HABIT
It’s imperative to simply get started saving and investing. Even if it’s just a small amount from each paycheck in your younger years, it adds up over time.
The younger you are when you start, the more time that compound interest has to work in your favor.
As you get older, it’s important to start thinking about for what you’re investing and what vehicles you can use. Whether it’s for retirement or saving for your children’s college education, you have to start somewhere.
Talk to a professional to figure out the best options such as allocating a dollar amount or percentage of your pay to go into investment accounts on a regular basis. Set these contributions on auto-pilot and give yourself a raise every year by increasing what you are contributing to those accounts.
<REDUCE UNNECESSARY PURCHASES
While it is tempting to splurge on the latest and greatest products, to improve your financial health it is important to live within your means.
It’s easy to ignore the repercussions of your spending when “living in the now,” but if you shun this mentality and are diligent in your spending, you will be in better financial shape years from now.
It is imperative to get back to the basics and differentiate between needs and wants. Many self-made millionaires drive modest vehicles and live in affordable homes.
Spending wisely on necessities will pay dividends in the future whereas splurging on nonessential purchases will create roadblocks to achieving financial well-being as you grow older.
While many want to ignore it, you need a plan to pay off debt.
If you’ve recently graduated college with student loan debt, begin making payments before it becomes overwhelming. If you’re nearing retirement age, it’s crucial to pay down debt now to ensure it does not continue to be a drag on your finances during those golden years.
If you have outstanding debt, can consider consolidating or refinancing to obtain a lower rate.
To prevent accruing debt in the first place, limit credit cards to one or two. Carrying smaller balances on many cards can make the total amount of debt deceiving and is an easy way to find yourself drowning in debt.
As with many things, practice makes perfect. It is helpful to find a financial mentor, whether that person is a financial professional or simply someone you admire and trust.
Finances can sometimes be a taboo topic, but don’t be afraid to ask questions or solicit advice.
By implementing smart money techniques now, you can set up yourself for financial success – and your future self will thank you for it.
Bill Van Sant is senior vice president and managing director at Univest Wealth Management in Souderton. He can be reached at 215-721-2112 or firstname.lastname@example.org.