The unfortunate truth is that we live in a world where young people are growing up less financially literate. That means they’re more likely to be financially insecure. A lot of the fault falls on the previous generation, who have failed to teach the younger ones the way to go. But here is what they didn’t teach you. Here’s how you strategize for a much more secure future. Regardless of what your income is, you can start building today.
Set real goals
So, you want more money. Have you figured out why, yet? No, living a little more lavishly isn’t a real goal. Real goals are those that you put you on a higher step financially than you were before. That doesn’t include spending more. It’s about accumulating worthwhile assets like a car or property. It includes making sure that you’re financially secure come retirement age. Or having an emergency fund so that you don’t have to go into panic mode if you lose your source of income. It can even be having put a certain amount of money into investing. Think of your financial goals like a castle. Build it brick by brick and set yourself milestones to help motivate your progress.
Balance your books
One of the best ways to see your progress on your goals is to measure what, exactly, you’re worth at this time. If you were asked that right now, would you know the answer? If not, that’s a piece of information you need to start learning. We’re talking about your overall net worth. Calculating it is easy, too, as www.Time.com shows. First, you have to take all your assets and possessions. This includes physical assets like a home or valuables. It also includes intangible money assets like bank accounts, stocks and IRAs. From that, you subtract any loans or debt you have. Student loans, overdrafts you’ve dipped into, everything. That’s how you figure out where you are on your journey. To measure progress on your long-term goal, you should calculate percentage gains and drops from your past net worth.
Learn to set money aside
If you want to build wealth, you have to learn to hold onto it. This can be done no matter how stretched you think your budget might be. There’s always a way to cut a habit or get rid of one subscription. You need to pay yourself first. This means, as soon as any money comes in, take a cut of it and set it aside. Don’t do it after you’ve done your groceries and paid your bills because it’s all too easy to lose track of spending that way. Set money aside immediately and do it every time you get paid.
Improve your credit
Young people have the tendency to not fully understand the impact of credit when they first get their hands on it. You shouldn’t treat an overdraft like an extension of your bank account. Nor your credit cards like a lifestyle fund. Your credit is very important to hitting those milestones like getting a house or a car. The better you treat your credit score, the better deals you get on loans. This means paying loans on time and dealing with debt proactively, not minimally. It’s also a good idea to have a look at your credit score. A lot of people suffer negative records because of items that shouldn’t be on the record at all. Check it out and challenge any erroneous knocks to your score.
Deal with debt
Most of us are going to accrue some kind of debt to carry around with us. For a lot of us, it will be student debt. But there are a lot of strategies you can use to deal with debt. First, set an order for how you pay them. You don’t have to split payments easily. Instead, prioritize the most urgent, then the ones with the biggest interest. You might be tempted to go for the smaller ones first. That’s a good way to improve your motivation, but those larger interest ones will only keep growing and cost you more in the long run.
It’s not enough to portion money aside. You should be looking into the accounts that can help you keep it safe and help it grow. For instance, you should be saving an emergency fund, as mentioned above. These funds should be between three-to-six months’ worth of wages. You should also consider which options have the most benefits for you. For some accounts, for every dollar you spend on the credit card, you get money into your savings account. If your employer offers 401(k) contributions to match yours, then prioritize saving into that. Just make sure you set up a savings account separate from your current one and resist spending from it. The sooner you start saving, the more you can benefit from cumulative interest.
Everyone knows that saving isn’t enough to start really growing wealth, however. If you want to improve your economic standing, you need your money to work for you. You don’t just want to sit on all of it. So, save towards some goals. But invest towards others. Start learning how to invest with help from sites like www.Fool.com/how-to-invest/how-do-i-invest.aspx. Experiment little by little, learning how the markets work. There are different ways to do it, too. As a passive investor, you put your money into decisions that a third party is making. It can be a good way to start, but you want to slowly become more active in making your own choices. You can also invest outside of the market, by starting your own business or getting into property. Just make sure you know about what you’re investing.
Protect your assets
We’ve mentioned how assets like property can be a valuable milestone in building financial security. Your assets are real wealth and they should be guarded as tightly as your money. Besides property, contents and car insurance, you need to look at liability insurance. Lawsuits are a danger lurking around every corner and you could suffer majorly if you’re hit by one. Liability insurance should cover your net worth. Every time your net worth gets a boost and you hit a new milestone, you should be increasing your liability insurance. Similarly, be careful how much you put into shared assets. You don’t know how a shared business or a marriage might go. Putting all your money into a relationship can be a truly risky game to play.
Follow the news
As you get more active in your investing, you should start to see how markets are not impervious to effects from the world outside them. They are value increases and decreases based on the events around them. For instance, the rise and fall of company stocks are tied to the developments in the business. You need to only see www.MoneyMorning.com/tag/facebook-stock-price/ as a case study on that. Similarly, currency markets can be influenced heavily by what is happening in that country. You will have no doubt heard, for instance, how huge an effect Brexit had and will continue to have on the value of the pound.
Be careful who you trust
While the news can help you build a knowledge base to continue making investments from, you shouldn’t trust all you hear from it. Patience and research are what make good investors. Not hopping on the first shiny opportunity that they see. This goes double for when someone contacts you about a sure-fire opportunity. No matter who it is, you shouldn’t put your faith in a ‘hot tip’ from someone else. You don’t know what their angle is. They might be trying to get you in on an investment scam, or they may be getting scammed themselves. Play it cautious. Play it slow. If something sounds too good to be true, then it probably is.
Keep expanding your options
Part of that slow approach is making sure that you’re not putting all of your investment money towards one option. You’ve undoubtedly heard the term of ‘diversifying your portfolio’. That essentially means splitting your investment money into different investments. The more different investment opportunities you’re in on, the less risk you’re dealing with. Your fate isn’t directly tied to how one market works. Instead, you should look into dipping into a variety of markets and a variety of opportunities. Yes, that means it’s necessary to spend even more time watching your investments and what news you pay attention. However, as we said, investment needs to be treated like a full-time job. Otherwise, you’ll never reach your potential for wealth growth.
It’s a lot to take in at once but just keep coming back and applying each lesson at a time. Find out where you are, where you need to go and start putting money aside to help you get there. Growing wealth needs to be treated like a full-time job. Work at it every day. The sooner you get started, the sooner you see the benefits.