Now that it is a new year on the Jewish calender, we can use this opportunity to take steps towards a more organized and financially secure year to come! Let's do it!
The one thing that a pandemic and inflation have taught us, is to have substantial control over our finances. While we were recovering from the damage caused by the pandemic, there came a round of layoffs followed by inflation. Those who had not planned for a rainy day were in trouble, and financial planning must be done over a period of time. It is important to take the time to learn a few financial rules to build a healthy and secure financial future. If you are struggling with your finances and have big goals to achieve, here are a few tips to help plan your financial future.
1. Use cash, not credit
Practice self-control and patience with your finances. Try to save for the purchases you want to make and pay with cash or a debit card. Avoid using your credit card for regular purchases, which will help save money in the form of interest. A credit card is something other than a loan that accumulates interest unless you can pay off the entire monthly balance. It should be used only during emergencies rather than for regular purchases.
2. Learn more about finances
There is no specific age when you should start or stop educating yourself. Take charge of your future and start reading about personal finance. Even if this is something you have never done, start today. Research professionals like real estate agents, accountants, mortgage lenders, and financial planners before you use their services. No matter your requirements, educate yourself and do your homework before spending money on anything.
3. Set your goals
We all have financial goals, which helps to divide them into short-term, medium-term, and long-term. Based on these goals, start saving and planning how to reach them. For many young adults, the ultimate goal is to own a home, and if this is your goal, too, you need to start saving for a down payment first. Research the industry and learn how to qualify for a loan, make the down payment, and then handle the mortgage. In the process, get more information about reverse mortgages to make the most of it once you turn 62.
4. Start budgeting
Building a budget is the first step to getting a solid hold on your finances. Keep the expenses within your income, and always watch where you spend your money. You need to create a monthly or annual budget and keep track of the money coming in and going out. Start tracking the daily expenses, and you will notice how much you spend on meals and entertainment. If you can cut even a bit of that, you will be in a better position by the end of the month. Small changes in daily expenses can greatly impact your financial situation. This will also allow you to invest in a home sooner than planned.
5. Build an emergency fund
One thing about personal finance is to pay yourself first. This means you need to save for emergencies and your future. It is a simple practice that will keep you out of financial trouble and help you sleep better at night. Even if you have a month with a tight budget, put some money into an emergency fund regularly. Once you get into the habit, you will not look at it as optional but automatically save and put aside for the fund.
6. Think of retirement now
No matter your age, start planning for your retirement at the earliest. Understand the power of compound interest and start saving as early as possible. It will not only grow your principal amount but will also help you earn higher interest over time.
7. Watch your taxes
You will have to pay tax on the amount you earn. So, when the company offers you a salary, check its tax liability and see if it meets your financial needs. You can use an online calculator to estimate the after-tax salary and see how much you have left. Consider all the applicable taxes and see if your salary is enough to allow you to spend and save.
8. Build your wealth
It might take a few years for you to reach the place of financial independence, but once you do, it is time to protect your wealth. Whether you are buying insurance or renting an apartment, read the contents of the agreement or policy in detail. Plan your investments wisely and continue to review them regularly. Avoid spending money on things you do not need, and always keep your long-term goals in mind.
