1. Self Control Is Key
No matter how much money you make, you can get into trouble if you have no self control. It really doesn’t matter if you make $40,000 a year or $400,000. If you spend without thinking, you will wind up in debt.
At the same time, no matter what you make, you can be financially sound if you have self control. What this mainly means is living within your mean and not making rash financial decisions.
You probably already know, or soon will know, that lenders will give you money whether you can afford it or not. Most make very simple determinations of whether or not you can afford a loan. They want to give you a loan because that is how they make money. This is a huge problem because, if you have no self control, you could easily create a problem for yourself. It is up to you to ultimately decide if you can afford a loan or a credit card.
The easiest way to maintain self control is to set a budget and stick to it. Also, wait several days before making major purchases. Waiting is the best way to maintain self control because you are often not as eager to make a purchase a few days later.
2. You Need A Budget
A budget goes hand in hand with financial self control. If you do not have one, get one. No need to do anything fancy, just write down all of your fixed expenses and then allot a certain amount of money for variable expenses like gasoline, food and entertainment.
Make your budget as realistic as possible so that you can stick to it. You are probably not going to stick to a budget with $50 a month for food or $0 in entertainment expenses. If your budget is livable, you will stick to it and you will have the money you need for all of your expenses.
Once you have a budget, you can easily see where your money is going and where changes need to be made. If, for example, you have no money going to savings, you can make some cuts in areas to change that.
3. Save For Retirement Now
It is never too early to save for retirement. As soon as you start your career, you should be saving. The longer you wait, the more catchup that you will have to play. Every year that you delay saving is another year that you will have to work. Sure, many of us love our jobs but that does not mean that we want to punch the clock forever.
In addition, if your work offers to match 401K contributions, max it out. You should take advantage of every dollar that your employer is willing to give you.
4. You Need An Emergency Savings
You never know when an emergency is going to happen. Because of this, you need to have an emergency savings account. It should have enough in it to cover three months to six months of your expenses. Without a proper savings, if an emergency happens, you are often at the mercy of short term loan providers like payday loan companies. Prevent this by opening a savings account at your current bank. Contribute to it until you have six months worth of bills in it. The money will be easily accessible yet separate from your regular checking account.
5. Make Student Loans A Priority
These days, if you went to college, you probably have a big student loan to pay off. Some people tend to think of them just like a mortgage but they shouldn’t. Don’t assume that it is fine to just pay down your loan slowly over the course of 20 or 30 years. That is wasting a huge amount of money in interest. Make paying off your student loans a priority to get this monkey off of your back. If you have not consolidated, consider it if it will give you a better rate. Then, immediately start making additional payments towards the principal each month. When you pay off your loan 5 to 10 years early, you will be grateful.
6. Buy A Step Down
Instead of trying to keep up with others, buy a step down. If you can afford a $300,000 house, buy a $250,000 one. If you can make the payment on a BMW, get a Ford instead. Better yet, don’t take out a loan at all if you can just drive a cash car.
Trying to keep up with others is a recipe for disaster. There will always be someone who at least appears to have more money.
Instead, buy what you can easily afford and put the rest into savings. Then, retire 10 years before everyone else.
7. Set A Goal
Without a goal, how will you know what to work towards. Setting one will help you stay motivated and financially sound. Everyone will have a different goal in life. Yours might be to retire at 50 or sail around the world. Maybe you even want to buy a deluxe travel trailer and tour the country. Just pick something and start working towards it. It will make financial restraint all the easier.