Thirties is often the time when your life actually begins. You have finished education, have a good job, and are in the prime of your life, financially and health-wise. However, the 30s is also the mid-way to the day of retirement and that is a scary prospect. It is therefore prudent to put away the fun and frivolity of the 20s and start mastering the below listed financial lessons.
Do Not Spend the Complete Paycheck
What are the financial lessons that we can learn from the life story of the self-made millionaires who live from coast to coast in the USA, or in other regions of the world? The most important finance lesson is the fact that they lived within their means and did not splurge the complete paycheck. These people usually lived in moderate homes and drove previously owned cars instead of splurging on designer apparels or expensive automobiles.
You may commence this sound financial habit (not spending full paycheck) by directly transferring 10 percent of your paycheck into a savings account. That way you will have only 90 percent of the money earned for spending purposes. Gradually as you learn and stick to the financial lessons that you learn over time, you may increase your paycheck savings to up to 40 percent. Most people can live a decent standard of life with 60 percent of their paycheck.
Benjamin Franklin had quoted “Having been poor is no shame, being ashamed of it is!” It means that remembering past poverty or current debts can be motivation enough for people to commence a frugal lifestyle and thus ensure better financial security for self and family.
Make a Budget and Stick to It
A lot of us think of planning a budget in our twenties when we get out of college and begin working. We also actually make an effort towards this budgeting goal by reading articles about finance lessons and investment, etc. It is, however, a sad truth that most of us mostly don’t follow through on that plan; we often fall prey to unbridled consumerism and end up “spending money we haven’t earned, to buy things we don’t want, to impress people that we don’t like!” It is, therefore, vital for us to stop procrastinating on creating a budget and begin the allocation of every dollar of your paycheck.
Budgeting allows us to keep an eye on the flow of every dollar, thereby helping us how to master money and make better financial decisions. Going on joyous vacations and shopping sprees is fine as long as they fall within the budget that you have created. Having a budget will allow you to have a more concrete idea about your spending habits, the different areas where dollars can be saved and expenditures cut, and sufficient savings for investments in a retirement fund or the stock market.
Benjamin Franklin had quoted “A penny saved is a penny earned.” It means that the number one step to accumulating wealth and being financially well-off is saving money.
Ensure That Your Financial Goals Are Realistic
One of the most important aspects of how to master money is understanding what your financial goals are! It is not something that can be conjured up at the drop of a hat. You need to think deeply about it, take some time, and even write them down for continued reference in the future. A well-thought out plan can help pave the path towards financial security and wealth building.
For example, if your goal is to buy a dream house, don’t make these money mistakes when you’re married, make a plan about how to go about it rather than just dreaming about it. Then, follow through on the scheme and sooner than later, you will have the ability to own that dream home. This same rules and financial lessons apply to other kinds of financial goals like paying off a student loan, clearing massive credit card debts, etc.
Create a Strong Emergency Fund
An emergency fund is a vital cog to better financial security and health. Life is fickle, and there are many unforeseen expenses (like health-related expenditure, immediate car repairs, etc.) that we cannot plan for. Presence of an emergency fund helps prepare for such unplanned expenses and prevents us from delving into our savings and depleting it.
The first step towards the achievement of this finance lesson is reaching a certain mandatory level of savings in an emergency fund. This can be about $1,000. You can start by saving about $50 to $60 off every paycheck, and the $1,000 will be built up in about 9 to 10 months. Never touch this fund except for emergency purposes, and keep adding to this fund every month.
Understand, Assess, and Clear Your Debts
Many of us really do not care about our debt situation when we get out of our twenties. Repayment of debt like auto loans, student loans, credit card debt, and mortgage, etc., has become an ingrained aspect of life and is often regarded as a regular part of ‘life in America.’ One of the most valuable financial lessons is the fact that we do not need to live an indebted life marked by having to pay off quick cash loans and other debts throughout our lifetime.
The first step to freedom from debt is setting aside the mortgage and then preparing a budget that can help clear off other debts and prevent the accumulation of additional debt. To accomplish this, jot down all your current debt from the biggest to the smallest. Then make minimum payments for all your debts, but pay higher amounts of money, that you can afford, as repayment for the smallest debt. This will help you get rid of the lowest debt in a few months. Then you can proceed to pay off the next lowest debt in line and continue the process till all debt is paid off.
Clearing debt will not only have a significantly beneficial effect on the budget, but will also free up more money for savings, investment, and other financial goals.
Benjamin Franklin had quoted, “Rather go to bed without dinner than to rise in debt!” It means that living beyond your means is not a wise thing to do and that a debt-free life is the best kind of life!
Save for Retirement
There are not many of us in our thirties who have a significant amount of savings for retirement. In fact, a lot of 30-somethings have nil retirement savings. Retirement will come before you know it and it is best not to keep waiting for more space in the budget to begin a retirement savings account. Many companies often match a specific percentage of your contributions to the retirement fund. Ensure that such company contributions are beneficial for you. The longer you are at a particular company, the more retirement savings you will have! Also, you will get more interest if you start saving now and early on in your life.
Discussed above were some of the major financial lessons in life that people need to master before it’s too late! Remember, rich people, know and believe in the adage “I create my life.” It’s usually the poor people who believe that “Life happens to me.”