In a world rife with options, it’s easy to lose sight of our personal finances. After all, practicing good money habits is difficult when we’re stuck in the daily grind.
Gain greater visibility of your long-term financial outlook by adopting these six tenets of personal finance:
It’s common to live with debt in the U.S. — but how much exactly? Per The Balance, the average credit card debt per household was $8,169 in November 2018, a five percent increase from October. But the more important statistic is the average debt for people who don’t pay off their monthly statement: $7,527. At average APRs of 15 percent, it’s hard to get out of the hole, which is why many households keep making minimum payments and holding on for dear life.
When there’s little room to increase earning power and trim savings, other measures need to be taken to move forward with your finances. That’s where debt consolidation, credit counseling or debt relief strategies can come into play. Debtors can pursue these options on their own or through accredited companies such as thought-leader Andrew Housser’s Freedom Financial Network.
Spend within Your Means (and Increase Your Earning Power)
In a world of limitless buying options and temptations to spend, living within our means is easier said than done. This is because living within our means isn’t a one-step process; it requires staying on top of several areas. You obviously need to spend less money than you earn, but you should first know how much you make and where all your money goes each month. From there, you can start cutting out the purchases that you don’t need.
But this is just the start. To really live within your means, you’ll need to stop spending like society does (which, as we learned above, is in debt). Don’t buy a flashy car, rent or buy a place with more space than you need, and overindulge in entertainment too often. If you’ve fallen in love with eating out because it saves time, learn how to cook simple and tasty meals. Finally, your means will only go so far after you clean up your spending, which is why it’s essential to work on increasing your earning power. Learn a new skill, get a part-time job, and consider adjusting your tax withholding to get more per paycheck instead of a year-end windfall.
Use Credit Cards Strategically
Credit cards are responsible for a lot of people’s misery, but when used responsibly, credit cards are just another tool in your financial arsenal. Why? Rewards and welcome bonuses. If you can reach a decent-to-good credit score through the above two steps and vow always to pay your monthly statement balances going forward, you can generate supplemental income using credit cards to pay for the same things you would have purchased anyway. From gas and groceries to restaurants and other everyday purchases, you can open cards that reward specific categories. At the end of each month or year, use your rewards to buy something you need, invest in yourself, or allocate toward savings/retirement.
Invest in Your Mind
Smart, successful people don’t magically become that way. They invest in themselves continually by reading books, taking classes, attending conferences and surrounding themselves with intelligent, ambitious people.
Of course, these things take a lot of time and effort, which is why most people don’t bother doing them — just like eating healthy or exercising. It may seem like these habits don’t translate to personal finance, but you’d be surprised. Esteemed minds and billionaires like Bill Gates, Mark Zuckerberg, Warren Buffett and Elon Musk all credit their success to learning, specifically reading. So, while using what little free time you have to nourish your mind may seem like a big deal, it’ll be a different store once you start observing your mental growth and shift in perspective.
Automate Monthly Savings and Investing
Now for the cold hard truth: you can’t enjoy personal finance success if you don’t build wealth. And while doing so earlier in life is always better, it’s never too late to start. A big mistake most people make is that they take care of all their monthly obligations and wants before paying themselves. This is backward. Even if your income is tight, you need to set something aside every month. How else will you be able to shoulder an unexpected cost? How will you eventually be able to stop working one day?
Every person’s economic situation is different, but the recipe for financial success remains the same. Live debt-free, within your means, use credit cards to your advantage, never stop fueling your mind and automate your bottom line.