1. The Three Basics
Money is complicated, so we are going to start with three basic rules. 1. Credit card debt. 2. Emergency fund. 3. Retirement account. First, you should always pay off credit card debt as soon as possible. Second, we should all have an emergency fund stocked in case of, of course, emergencies. These don’t always have to be for unexpected tragedies but maybe even for something exciting and spontaneous that warrants the emergency fund. Lastly, we should have retirement accounts that are in existence and growing. As much as we love our jobs, we don’t want to be 90 years old hunched over the computer typing away for our next paycheck.
All of the other things people need money for such as travel, investments, and even homeownership, should come after these three crucial necessities. Simple right?
2. Create A Budget
A budget is important to complete the three basics plus more. We should learn how to budget as soon as we get our first babysitting job when we are 14. Budgeting our money can help us reach our goals in a well organized and less risk-averse manner.
Buying a home, paying off credit card debt, and going to eat out at our favorite restaurants all require successful budgeting. Ever wanted to travel the world? Well, that too needs some detailed budgeting so we can make it from destination to destination and explore the world without becoming penniless and needing to cut the trip short. Trust us, we are making it to Italy for pasta and fashion, even if it requires hours of planning and budgeting.
3. Beware Of Budget-Busting Friends
Everyone is at a different place financially but that doesn’t mean it's ok to lose friends over it. There will come a point where we must choose to responsibly manage our money or spend it all with our reckless friends. There is a balance here. We can have good times but also not spend all of our latest paychecks on a yacht day. If our friends dump us because of this, then they are not true friends. We should never feel forced to “keep up” with the people who are supposed to care about our well being.
If certain friends leave us with an empty wallet and heart, we need to reconsider who we spend our time and money on. If others have more than us but are ok with ordering in pizza and watching a movie to spend time with us, instead of an expensive night in town, those are the true keepers.
4. Seek Out How A Significant Other Budgets
Listen, we don’t want to ask him/her what their budget looks like on the first date but we do want to keep in mind how our significant other handles money. We know their favorite foods, movies, and music but do we know if they budget? These are important things to discuss when getting serious with a partner. That person may become the person we spend our lives with and build a financial plan with, something we must do with the right person.
Here are a couple of money questions to ask one another: Do we understand our debt, assets, and expenses? Will we have joint or separate bank accounts? How has money impacted our upbringing? We plan on asking these after being served spaghetti as we shall not ruin that moment!
5. Find Own "Money Personality"
To ask others how they are with their money, we must establish our own “money personality”. The five common money personalities include shoppers, debtors, savers, investors, and big spenders. Debtors and shoppers are known to spend more than they have while big spenders may not worry about debt but shoppers seek out sales and bargains. Which ones are us?
If we aren’t sure which personality we are, or we know and we don’t want to admit it and face the reality, there are multiple online quizzes that assess responses and report back exactly which personality we are. We advise taking one before budgeting as the results could be surprising.
6. Net Worth
When we hear the words "Net Worth" it is assumed someone is discussing Elon Musk or Jeff Bezos. Not only billionaires and tech tycoons have net worths, but we all also have a net worth. How exciting! Net worth is defined as the total of assets minus debts. Assets include things such as bank account balances, investments, and savings, while debts are loans, mortgages, and credit card debt. Finding out net worth is the best and easiest way to get a bigger perspective on personal finances.
There is an easy way to find out net worth. There are online calculators where we can link our accounts to find out our net worth. Regardless of what our net worth is, it is crucial to remember we are all worth more than numbers! Corny, we know but accurate!
7. Monthly Money In & Money Out
We must keep track of how much money we make each month and how much money we spend each month. Although this sounds completely obvious, most people don't know how much money they have coming in and out each month. To budget correctly, we must know our incoming versus outgoing finances.
A simple way to do this is to make a list of what we make each month, especially if it varies. Then a separate list of what we spend each month. These are the basics of budgeting. Even things we don't necessarily think are important to record such as the most recent amazon order, must be jotted down to keep accurate track.
8. How Much To Save
Ever wonder how much to save? Easy, 20%. This number is derived from the 50/20/30 rule. This divvies up the monthly budget in terms of percentages. 50% should be reserved for essentials such as a mortgage, rent, and groceries, 30% should be allocated for personal lifestyle choices and 20% must go to "financial priorities" which are debt payments, retirement contributions, and savings.
Of course, this percentage rule isn't applicable 100% of the time. For the most part, though, try to follow the 50/20/30 rule to stay in line with the financial times. On that special month, we like to splurge and make it 50/10/40 (;
9. Down Payments
There is no rush to buy a house! Before buying a house, we need to make sure we are financially stable. So many people rush into buying a house because they feel that they must own home as soon as possible but now they cannot handle the payments. Think twice before putting down a down payment on a home.
Once we are certain we can afford it, we can proudly shake hands with the realtor and move into our homes with ease and less stress. For now, cute little apartments with lots of plants will do!
10. Now The Home
Unfortunately, we are not members of the HGTV home network and are not getting our home redecorated for free. For most of us, it costs big bucks for big projects. We need to have aspirations for what we want our homes to look like but not let them drain our bank accounts.
We need to have aspirations for what we want our homes to look like but not let them drain our bank accounts. We can make realistic renovation plans. In that case, tear out the bathroom and build that walk-in closet. Oh, and don't forget the pool!
11. How to Not Have Debt
When possible, we should always be saving for our future rather than paying off our past. Here are some tips to get out of debt so we can start saving for our luxurious retirement in Palm Beach. First, make the most out of every dollar. Enjoy ourselves but don't indulge in expensive luxury when we cannot afford to. Another tip is to consider debt consolidation. If so, roll all the debt into one account to have lower interest rates.
The most important tip is to know the why. Figure out the financial goal and use it as motivation to get rid of the lingering debt and take a picture with a sign to let everyone know the accomplishment!
12. Know What A Financial Emergency Is
Having a financial emergency account is crucial but it should not be overused, just as it shouldn't be underused. Here are five reasons to use the emergency fund: credit card debt, time off between jobs, sickness, market crashes, necessary home repairs. Only dip into the fund if insurance does not cover these things.
Having an emergency fund also makes financial planning much less stressful so we can maybe break into a smile when going through our taxes knowing that if something major happens in the future, we will be ok.
13. Credit Score
A credit score determines what kind of credit cards we will get approved for but also how expensive a mortgage and car loan will be. Monitoring and improving our credit score is a must. Paying bills on time and using less of the available credit card limit can raise a credit score in a month.
So, work on the credit score now so a judgemental baby won't be able to say those words.
14. Health Care Proxy
We know this is not a fun topic but it is a must. If something happens we all need to have a health care proxy to make medical decisions. It is not a fun task but it can change a life.
Choose wisely when deciding on a health care proxy. Oh, and speaking of health, we can't wait to get our covid vaccines so we are healthy enough to not need a health care proxy!
15. Ideal Retirement Cost
There are calculators online for everything, including determining how much a person's ideal retirement will cost them. We want to be by the ocean with as many activities as possible and the best buffets there are available. This is not free. We know we need to be saving so we can have the lazy days of our dreams.
That man definitely thought ahead because now he can play skeet ball all day with zero worries. What a life!
16. Saving for Retirement
We must know how much we already have saved before we settle on our awaiting paradise. A 401(k) is a start. Crunch the numbers and decide on what still needs to be made and saved in order to reach that perfect retirement.
It's very hard to think about the future when that adorable pair of shoes or a shiny new laptop beckons, but that sunset may be compelling enough to skip on some of those luxuries for now.
17. Taxes and Retirement
Certain retirement savings tax now and are tax-free later while others are tax-free now but charge tax when withdrawing funds. Confusing? Yes, but can be managed. We should be diversifying our tax situation in retirement and having tax-free sources of income as well as taxable sources so we can control the tax bracket once it is time.
This seems just as complicated as the girl screaming doing her taxes, trust us we feel her, but taking it step by step and consulting professionals will make financial planning for retirement much more manageable.
18. Life Insurance
Life insurance is an eerie concept for sure. It is also a life-saving option. Life insurance protects those who we love and is a way to take care of them if tragedy strikes. It is an expression of love and care and buys time and options.
We don't enjoy talking about the sad and serious stuff in life but being prepared for it makes dealing with the aftermath much easier.
19. A Will
While we are on the topic of death and finance, we may as well go over the need for wills. Yes, plural. There are two. A last will and testament is a legal document that specifies what should happen to all that we own when we die and where our possessions should go. This is where in TV shows we find out who the favorite child was.
A living will is a health care directive for what should happen to us if we cannot communicate our wishes. Both are needed. If there is a will, there is a way my friends.
20. Financial Plan
People who think about the future are better at making their money grow. Money does not grow on trees, but it does grow. A financial plan is like a branch. Trees need water and so do we. It is extremely beneficial to plan financially with professional services that can help us get to where we want to go.
Everybody's financial plan will look different but it is crucial to have one in order to manage all the things we have discussed and will continue to share. A financial planner should be aware of what our goals are and most importantly make us smile instead of stress. The stressing, we can do out of their office.
21. Start Today
The older we get, the more complex money is in our life. It is easy to say that we will save more once we make more, but once we make more we have more to spend on. Getting older involved new and exciting things such as a home, a wedding, and our children's education. All of those things cost money.
Today is the time to start, not tomorrow, not 5 years from now, but right after you finish reading this article. We're kidding! That would be crazy! Or would it...
22. Parent's Finances
Life is really just a cycle. It is a tough role reversal, considering our parents were taking care of us, but it is time to flip the role. The conversation may be tricky but it is important to know where our parents stand financially in case we need to help them. We need to find out information about their health and long-term care insurance to see what securities they have in their future and where we should step in.
My grandma has a pillow that says "Be nice to your children, they decide which nursing home to put you in". I never fully understood that until now. Maybe that's why she loved giving us cute pink little piggy banks.
23. The Truth About Other's Finances
As much as we like to think we know what goes on behind other people's doors, and in their bank accounts, we never will really know the truth about other people's finances. That coworker with designer clothes may be deep in debt or come from family money.
The neighbor with the fancy car could be close to foreclosure. It is never wise to compare ourselves to others because there is no way of knowing the truth. And, it is just never good to compare.
24. Investing
Before we invest all our money in cryptocurrency, it would be wise to know how it works. Sorry bitcoin, you're going to have to chill and wait a minute. As fun as it seems to invest in up and coming successes, do the research! Things flop and it would suck to lose all our money.
Also, we shouldn't even consider the mere thought of investing until we have a fully-funded emergency savings account, no high-interest debt, and are on a sweet road to a wonderful retirement. Only then, can we say yes to bitcoin.
25. Interest
We must know the ins and outs of interest to be able to control our money. Simple interest is a percentage multiplied by the amount and the length of time promised to pay a loan back. Compound interest is calculated frequently, making the interest grow continually.
Knowing the difference between these interests can help us make decisions when leaving our money in the bank and taking out a loan. Also, always stay focused on what interests you instead of the person who is at the bank, because as usual, you are not their first priority.
26. Tax Accountant
It is possible to do our own taxes, but we can also hire someone to file our returns which will cost more money, but cost much less mentally. The key to this is finding a tax accountant that we trust, as doing our own taxes can become quite taxing.
Some tax accountants will also offer tax planning advice that we would never know about to help individuals and businesses save money in taxes.
27. Financial Planner
Just like we said it is important to have a financial plan, it is just as important to have a financial planner. This person should be smart, capable, and 100% on our team.
A financial planner that is commission-based or focused on fear should be avoided as these are major red flags.
28. 401(k)
We are sorry to bring up retirement again, but we assure you that you'll thank us in the end. A 401(k) is a retirement savings plan. Pulling money out of a 401(k) can set us back years and years when it comes to retiring. This is another reason why having an emergency fund is crucial so that we are not forced to use our 401(k) early.
Another reason to not take from our 401(k) is that it comes with a huge tax bill the following April.
29. 529 Plan
Oh, no more numbers... A 529 plan is a plan to help save for our children's college education. Although these youngsters are heading into their first day of preschool, it is never too early to start thinking about their college education.
Listen, if our kid happens to be an outstanding athlete or the smartest kid in their class, maybe scholarships can cover the cost of college. This is a risky thing to bank on so in that case, start putting some money in the bank.
30. Compensation Packet
Sometimes we are just so excited about getting the job that we forget to ask about the benefits and quickly sign the line. Knowing more than the number that makes up our base pay is important before accepting an offer. We need to ask about health benefits, insurance, and retirement (there's that dang word again) plans.
Only then, once we are aware of the entire package, can we make the decision to accept the offer and walk into our first day with confidence and ease because we deserve the job with all the benefits.
31. Negotiating Salary
Yes, spending less and saving more is basic rules but what If we could make more? The fastest way to financial freedom is by growing our income. We need to be certain that we are earning what we are worth.
If we feel as if we are being undervalued and underpaid, it is important for us to negotiate a better salary. We are hard workers and deserve to be fairly compensated. So confidently strut into that boss's office and demand your worth! Of course, in the nicest way possible while still being firm.
32. Time Maximization
Time is money. But it is also just time. This being said, use it wisely. When we are not working, we love to spend time with friends listening to music and take time for ourselves to relax and unwind.
If we focus all our time and energy on finances, we won't be able to enjoy the money we are so keen on making. Remember to always take some time to enjoy the fruits of your labor, maybe even through a spiked fruit smoothie at a boozy brunch with friends.
33. Have More Than One Goal
Now doesn't this dude look zen? This is because he has mastered the art of juggling multiple money goals. It is possible to want to add to savings, pay the debt, put away for retirement, and go on that dream vacation all at the same time. It definitely sounds like a stretch but will the correct financial planning it is doable.
So let's all make a list of our goals and add to the top, look like this guy while going through your bank account statements.
34. "Enough" Money
There is no such thing. Even Bill Gates does not have "enough" money. As our incomes expand, our lifestyles expand and we find ourselves wanting more. Even the top 1% feel as though they don't have all they need. Sounds ridiculous right?
Instead of always wanted more and more money, focus on what we need and also what we can make happen with what we have. Shoot for the moon, but be ok landing on the stars. Just don't be like this dude, and definitely live past next Thursday!
35. Rebalancing
As we know, life is always changing and nothing is permanent. That is why it is important to understand the art of "rebalancing". Our portfolio should be rebalanced occasionally to make sure we are set to grow while also protected in case of economic crashes and recessions.
Maybe there is even a new credit card to add to the accounts which would rebalance the portfolio. Rebalancing can be done when there are new and exciting additions as well as when there are unexpected difficulties.
36. Dress Fab
Seriously, it is possible to dress for less while still looking our best. We know. Overspending on the latest fashion trend is a huge downfall for a lot of us. Instead, we can cut down on our clothing budget but still look fabulous. There are always online sales happening and discounted off the rack stores all over the place, we just have to be savvy about finding them.
Also, now that most places are work from home, we may as well just stay in our cozy PJ's all day and save our money on..you guessed it.. retirement!
37. Splurging
Even just a little daily splurging can cost a lot. We love our morning coffee and smoothies but if we cut the $7 a morning drink down to half of the week we could end up saving more. It is important to recognize what we are continuously spending money on that we don't need to.
Once we get that in order, we have extra cash to get matching hoodies with our girl gang. Just make sure the drinks don't spill on our new apparel!
38. Money Friendly Meals
Huge tip- find a favorite under $10 dinner. There should be at least 5 quick meals we can have that won't break the bank. There are more and more healthy and cheap TV dinners available that we just have to pop in the microwave. And of course, there is always ramen.
We can also prepare our own cheap healthy meal if we have the time. Some ideas are shrimp and veggie stirfry or salad with protein. Breakfast for dinner always works with some scrambled eggs and toast that is sure to meet the dollar mark.
39. Money Can Affect Positive Change
Ever heard of the phrase, put your money where your mouth is? If we talk about wanting to change the world, we should take action. A good way to do that is by giving to charity.
Another way to use the money to affect change is by socially responsible investments. This is an ethical investment that seeks to consider a financial return as well as social and environmental good in order to bring about social change. An example would be investing in the clean energy industry.
40. Money Don't Buy Happiness
Yes, money makes life easier and buys things that can buy temporary happiness but the best things in life truly are priceless.
We all know that having loving friends and family around costs a lot more than whatever money can buy.