We can all lead simpler lives by learning how to manage our money. A person’s life is not the only thing that suffers from a lack of finances-planning for the future, having enough financial security, and investing wisely are just some of the benefits that come from learning about personal finance. It doesn’t matter if you’re a student or an adult, this article will help get you started on your journey to a more financially sound future.
Saving For The Future
Many of us are living paycheck-to-paycheck and we’re certainly not saving for the future. When we leave school, we want to get a job – we don’t think about how that money will sustain us in ten or twenty years. We usually put off thinking about what happens when we retire because retirement is decades away and it’s difficult for most people to imagine themselves in their sixties, much less how they’ll be able to maintain a lifestyle once they’ve retired – nevertheless, it’s important to save for the future. If you’re interested in learning more about saving and budgeting, you can get some great resources from DyerNews.com to help you in your journey. If you save even just one percent of your income, you’ll accumulate $50 over ten years (assuming six percent interest). If you put away more than that amount every year and invest wisely, then you’ll stand to gain quite a bit more. The value of time is another reason why it’s important to save early and experiment with different investment strategies while you’re working instead of waiting until you’ve retired.
Time Is Money
Suppose that you invest $1,000 every year for the next forty years (also assuming six percent interest) – then at age sixty-five, your savings will amount to $64,581.48. If you were to wait ten more years before making any investments (keeping in mind that this means increased risk due to increased time), then by age seventy-five, your total savings would only amount to $43,719.34 because inflation will have eroded most of the real value of those investments.
Investing Wisely
Our generation is thought of as “the spending generation” – we spend frivolously and seemingly without thought, but this isn’t because we don’t want to save – it’s because no one taught us how to manage our money. Most people go to college for four years (or more) and graduate with tens (if not hundreds) of thousands of dollars in student loan debt that they’re responsible for repaying, which can make saving difficult or even impossible. However, there are other ways to invest your money wisely like index funds, bonds, mutual funds, commodities, etc. Plan and learn about different investment strategies by attending workshops at your local library or reading books on finance so you can start investing early. Investing is serious business, but there are ways to make sure that you don’t lose your money – do your research before making any investments and always diversify (don’t put all of your money into one stock or fund). Be patient and persevere because, with time, your investments will grow exponentially.
Budgeting Your Monthly and Annual Expenses
Budgeting your monthly and annual expenses is important because it allows you to account for all of your income and expenditures, which can help you identify where your money is going. A budget should contain both fixed expenses (e.g., rent, bills, groceries) and discretionary expenses (e.g., entertainment, dining out). The more detailed your budget is, the easier it will be for you to see where you have excess funds available so that you can save without short-changing yourself on things that are important to you. Budgeting doesn’t have to feel like a punishment, creating a personal budget can be fun if you approach it with an open mind!
How To Create A Budget
Make a list of your monthly and annual recurring expenses. For each one, write down how much you spent on that expense in the past six months (you can also go back further if necessary). Include an approximate average for each expense – this will help you predict future expenditures by basing it on your previous spending habits. Putting together a budget is only half the battle – now you have to stick to it! It’s important to realize that not everything comes up roses with money management – there are many different aspects to managing personal finance. However, with time, patience, and practice, you’ll be able to learn about money with ease, enabling you to live debt-free.
Saving for the future isn’t difficult if you’re willing to work for it – reduce expenses by cutting out wasteful spending, pay off outstanding debts as quickly as possible, and set aside some of what you earn every month towards savings. Invest wisely in low-risk ventures like index funds or bonds so that even if the market takes a downturn, you’ll still come out on top with returns over the long term.