When most people receive their paycheck, there are a litany of items to purchase and a mountain of bills to comb through. There are more demands than dollars competing for attention. Determining what bills to pay, food to buy, items to purchase for the house, the children or yourself is enough for constant confusion. Not to mention, if there is an emergency that occurs with the house, car or the children. The fact of the matter is, money is the longest relationship you are ever going to have and it is usually a balance between love and hate. Yet, we know so little about how it works. In order to have a strong foundation with any subject, you need to start at the beginning.
So, let's start at the beginning. There are 4 basic areas every adult should start with when maintaining a successful financial life. These 4 basic goals will help you find the balance to live within your income and take control of your financial life. With hard work, discipline and yes, sacrifice you will be on the road to tackling the financial topics in your life. There are more than 4 topics to discuss in a persons finanical life, however these are the basics, the foundation that everything else is built on.
1. Save Money by starting a SAFE Fund
Commonly know as an emergency fund, the SAFE fund (Saving Amount For Emergencies) is money set aside to give you comfort in case anything happens out of the ordinary. Don’t worry about how much money is in this account, just start it. And add to it by having an automatic deduction from your paycheck go into this account. Make sure this account is at a different banking institution from your main checking account.
2. Save for Retirement
The money you save now for your golden years may be the only money you have. Social Security may or may not be there for future generations. You must sign up for the 401(k) or 403(b) at your place of employment. This is not optional. Even if they do not offer to match the money you put in the plan, still put money into the plan. The deductions come out of your paycheck automatically before you receive your money and the federal government does not tax your contributions. Most importantly, this is the money you will have when you retire from working. The sooner you start saving the more money you will have. No matter how much you are earning start with at least 2% of your gross wages.
For example, if you earn $12.50 per hour 40 hours per week your gross wages is $500, 2% is just $10. $10 every two weeks going into a tax-free account adds up over time. In 30 years at just 6% that is almost $22,000!!! All from $10 per check; imagine if you saved more. Social Security and what you save is all the money most people will have for retirement.
3. Follow a Budget
Budgets are hard to make and even harder to follow. There are many budget templates on the Internet to use. You could start with writing down all your bills that do not change including your rent or mortgage. The rest of your money is for everything else. This is the money you have to live within your income. Remember, making your morning coffee and packing your lunch at home, saves more money than you realize. Don’t over spend or use credit cards for daily expenses.
4. Buy Life Insurance
The younger you are, the cheaper life insurance will be. Invest in life insurance as soon as possible. If you are younger than 30 years old, buy as much whole life insurance as you can afford because it will only become more expensive as you get older. Whole life accumulates cash value, which will have many uses when you are older and the premiums do not go up, ever. When you are older than 30, consider a 30 year term life insurance policy. Either option will serve you well.
These are the 4 most basic principles to a better financial life. Follow these steps and you will be on the road to controlling your spending and accumulating wealth for your future.