Let’s face an honest truth: some of us are just bad with money. Like they say, the first step to solving a problem is admitting you have one. Admit that you are practically financially illiterate, and work towards improving your finances on a daily basis. Read financial books, watch financial gurus, and most importantly take full responsibility and control of your current financial situation.
There are many signs someone suffers from a case of bad personal finance. For example, those who need a payroll advance on a regular basis are sending red flags that their finances are in trouble, as these types of loans should only be used occasionally to cover temporary cash shortages. Simply put, if you depend on borrowed money to live day to day, your personal finances need an overhaul as soon as possible.
We are going to be going over some of the additional signs in today’s article, as well as ways to improve your financial situation in the long-term.
1. Use Credit For Everything
It’s okay to use credit on some things because you obviously have to build it up. A red flag is when someone puts everything on credit. Generally, they are putting everything on credit because they cannot afford all of it. By doing this, they rack up debt and get themselves into a financial mess. Others think that transferring the debt will solve their problems when it won’t. If you can pay cash for something, pay cash. If you need to build credit, make sure you will be able to pay off the card when the payment is due.
2. You Don’t Realize How Much You Spend
This is by far one of the worst financial habits out there. Funny enough, money likes attention. When you give it none, you will soon be out of money. This is why it is so important to make a budget and track your spending daily. By doing this, you won’t be surprised by any transactions. Focus your attention on your money and you will soon have more of it.
3. Waiting to invest for retirement
The sooner you invest, the more time you will give your money to grow. This is why it is so important to start investing around the age of 20. By doing this, you will give your money 40 to 45 years to grow. Over time, the interest will earn even more interest on it. This is what is known as compounding. One of the financial vehicles that do this well is known as the Roth IRA. It grows tax-free which makes it even better.
Improving Your Day-To-Day Finances
1. Make A Budget
Unless you are already in a place of financial abundance in your life, I would definitely recommend implementing a budget. You should create this budget every month and make it unique to that month. By creating this every month and sticking to it, you are taking full responsibility for your finances. By doing this, it is going to be pretty hard to lose with money over the long haul. You are going to know where every dollar is spent and where it is spent. You will have control and knowledge of every transaction. At the end of the month, you should still have a surplus of cash. If you do not, your income is too low, your expenses are too high, or both. In the end, adjust accordingly.
2. Save 15%
In your budget, make it a goal to save at least 15% of your take-home pay. Store this money in a sacred savings account. Once you build this money up enough, you can invest it into a retirement account or use it to pay off something. This is there to be a safety net. Eventually, you are going to want to get that number up to 30%.