Unlock The Door To Financial Freedom

Adult life will often take people by surprise. Most don’t expect to be thrown into a world of bills, debts, and other money problems. But, the world of finance is a cruel one. And, it doesn’t treat anyone kindly. This makes it extremely important to be prepared for unexpected issues and have the knowledge to set them right. Once you achieve this goal, you will reach a new level of financial freedom that you’ve yet to experience. To help you out, this post will be going through several areas of finance that every adult should consider. And, some ways that can be used to improve your current situation.

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  • Savings

The path to financial freedom starts by spending as little money as possible. Most people will get through a large chunk of their pay within the first few days of getting it. When you have money in the bank, it can be easy to feel like you don’t have to be careful. This will often lead to impulse buying, which isn’t good for anyone. So, when you first start budgeting; it’s important only to spend the money that you absolutely have to. If this means missing out on some luxuries for a while; that’s alright. You can use these items as motivation to get you through the saving. Thinking about what you miss will make it easier to drive yourself to success. The money that you save from this should be put away safely, though.

The money that you save won’t be much use while it’s sat in your account. And, you might find it hard to save without a goal to reach. It’s best to try and save enough money to cover at least three months of living. This will give you more than enough money to resolve most issues before they impact your life. And, this gives you a reasonable goal to reach. This money should be kept in an account that is designed to make a large amount of interest. Most banks will offer small savings accounts, which allow you to have access to your money instantly. These are perfect for most.

  • Debt

Some people will find that their issues are more than just a lack of money. A lot of people have debt to deal with. But, this sort of issue can be very hard to deal with. Thankfully, if you’ve followed the first step to save and put your money away; you’re already on track to start paying off your debt. If you can; you should aim to save alongside repayments. This will mean that you’re making progress in both areas. And, will help you to reach your goals faster, too. A lot of companies that offer loans will also offer you the chance to rework your repayments; if they’re too hard to make. This gives you the chance to get some help with your loan.

Throughout this stage, you have to be very attentive. It’s easy for money to disappear without a trace when you’re not watching it carefully. Money gets spent; then, you will forget about it. And, soon enough, this could make it impossible to pay back your loans. There are loads of tools that can be used to help you to monitor your money. Systems like Quickbooks give you a great chance to get control of your money. And, they’re not expensive to use. Along with this, it’s important to learn when is best to take a loan. A lot of people find themselves in a bad situation with debt because they have to get a loan in an emergency situation.

But, this nearly never has to be the case. If you monitor your money all the time; it will be hard for future issues to slip through the net. You will have a good idea of when you will need the money. Using this sort of practice will help you to predict how much money you will need long into the future. Instead of having to rely on getting money quickly and paying high-rates multiple times; you could get a larger loan to cover everything. Or, if you can see that your current debts are getting to a low enough level; you could consolidate them all into a bigger loan. Having your debts in one big loan will usually mean that you’re paying a lot less interest back. You will only ever have to pay money to one place. And, you will have the chance to spread the loan over a longer and more reasonable period. These are all great benefits to those in debt.

  • Income/Outgoings

There are other considerations that have to be made; when you’re working on your money. A lot of people don’t earn as much as they should for the work that they do. Thankfully, this is easy to check, too. Most countries will have resources available to help you find the average rate of pay for your position. If you’re paid less; you could talk to your employer about a raise. This might not work, though. In this case, it could be worth having a look at some similar jobs. You may find that you can get a very similar job in the area, with higher pay. This could make life much easier for you when it comes to sorting out your money.

To further help with your financial situation, you could also look into some other ways to make some money. Most people have skills or interests that can be translated into income. For example, you might really enjoy playing musical instruments and have the right skill level to teach them. In most places, you don’t need any specific licenses to sell this sort of trade. So, you’d be able to do it freely and easily. When looking for chances like this, it’s best to do loads of research. Most people will ignore most of the options in front of them. But, to get the best chance at making money; you have to take advantage of everything you can.

Sorting out your financial situation won’t be easy. But, likewise, living without enough money all the time will be very challenging. You have to consider which of these lives you’d prefer to lead. If you make a difference now; you’re much more likely to have a comfortable future. If you don’t, though; you’ll be happier now. But, life could get very hard later on.

Before You’re 30: Steps To Real Financial Independance

If you’re reading this, you’re probably somewhere in your early to mid-20s. You’re starting to make your own money and maybe even starting to see a little of it become disposable. We know that you might have all kind of costs that demand a big chunk, but that extra could help you become truly financially independent. Here are the steps you could take.

image of American coins - the importance of saving

Picture by Jeff Weese

Stop using your credit like a cookie jar

Half the country’s millennials have never checked their credit score. That’s a shocking fact, but the fact lies on those who failed to teach them about credit. When you’re young is when you’re most likely to ruin your credit. It’s time to stop using those open lines of credit unless you’re prepared and able to pay them off now. When it comes time to buy a new car or a house, you’ll be thankful.

Start dealing with debt

If you’ve already dipped your hand into that cookie jar one time too many, it’s likely you have some debt to deal with. Start learning debt elimination strategies and plan your approach to it. Stop charging things to your credit cards and cut out some of your luxuries to start paying more than the minimum.

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Building a nest egg

There are no two ways about it, you need to start saving right now. It’s easy to blow through your free money before you have the chance to save emergency funds. The trick is to put the money into savings, first. 15% of your income should be going to building those funds. They’re essential. Failing to save them could mean getting into a debt spiral or even falling bankrupt due to a financial emergency.

Get protected

Other financial emergencies can be taken care of without much heartache thanks to your insurance. By the time you’re thirty, there are some policies you need to be taking care of. If you have a car, you need auto insurance. If you have a place, you need property insurance for at least your contents. Disability insurance is an important confirmation of the fact that life is uncertain and we don’t always know how able we will be to work. Life insurance is needed because as uncertain as life is, you don’t know when it might end. You don’t want to put your loved ones into hardship because of your failure to prepare.

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Time to start preparing for retirement

No, thinking about retirement isn’t for older people only. The sooner you get started on it, the better it’s going to be for you in later life. Talk to your employer about 401(k)s so you can start saving automatically from your income, or an IRA or Roth IRA if your employer doesn’t provide 401(k) contributions.

Start investing

Roughly 20-30% of your whole income should go into financial preparation. After you emergency savings, debt relief, retirement, and insurance payments, you’re pretty much protected. If you have any extra cash after that, it’s time to start building it. Look into learning about building easy, set-and-forget investments to begin with. As you start building a portfolio, start learning how to manage it more actively.

The clock is already running. Make sure that in ten years from now you’re not in the same financial situation you’re in now. Lay the groundwork for a truly successful future.

 

How Saving Young Can Add Up Over A Lifetime

In times like these financial conversations are more common than ever. They are particularly important for those just starting out in their careers. The young generation of today has entered a battered workforce and economic turmoil. This article will discuss the importance of saving in your youth.

Compound Interest

Einstein is known for making the statement, “There is no greater force in the universe than compound interest.” This is certainly pertinent to this subject matter. Saving doesn’t have to be a matter of high salaries or inheritance, it is more important to have a disciplined steady approach. Someone who saves $100 monthly from age 25 to age 65 will have saved a total $48000.00  in 40 years time. These figures assume no interest gained in those 40 years.

Now here is where compound interest takes over. Now lets take that same scenario; $100 a month for 40 years assumed a 6% interest rate annually. Over that period of time your total would now be $200,144.82. Quite a stark difference you might say. Now let’s try to do this scenario with a 10% return; that would give us a total of $637,678.02! Your starting to get the picture now.

But why is it important to start early? Well simply put, your money will grow the most when it has the most time to compound. The example above is certainly impressive, but what if that same person started saving when they were 45 rather than 25? With the 10% annualized return they would have $76,569.69. A nice figure but nowhere near the $637,678.02 over 40 years. This should illustrate both the power of compounding and the importance of starting early. To compute your own scenario visit this compound interest calculator.

How do we find the interest?

So after exploring the scenario above you may be wondering how you achieve these rates of return. There is no simple answer to this. Currently interest rates on certificates of deposit and money markets are near 0%. These are the safest types of investments, but they do not provide much of return these days. The other options are stocks and bonds. These securities can be complicated to make money on even for an experienced investor. The best bet for a new investor would be a mutual fund.

A mutual fund is a collection of stocks and bonds that provide an investor with more exposure to the market. Instead of just buying one stock the investor holds shares of a fund, this fund can hold hundreds of stocks or bonds. This provides more diversification for the investor and more safety overall. Historically growth stock mutual funds have returned an average of between 8%-12% annually. For more information on investing options, check out Morningstar.com.

David Spader is a freelance writer and blogger who usually looks at savings account deals over at SavingsAccount.Org. His most recent review looked at the best saving account rates.