Life is much easier when you have good financial skill. With good financial skill, you can make your life more fulfilling and enjoyable. This is one of the skill we must learn in life. If you want to live a better life with good financial skill, then here are some tips to improve your financial habits.
- Understand Your Current Financial Situation
Before you can start managing your money better, you need to take stock of your current situation. The most basic step to understanding your current financial situation is to record all your regular monthly income and expenses. If that sounds overwhelming, Heider says you can take advantage of numerous apps that can automate the process.
If you aren’t comfortable linking your bank account to an app, save receipts for a month to determine where money is spent beyond major bills like rent, utilities and debt payments. It could be a wake-up call to realize how much is being spent on items such as groceries or dining out.
Working with a professional is another way to understand your current financial situation, and it may be possible to find this help for free.
- Set Personal Priorities and Finance Goals
Once you have laid out your current financial situation, it’s time to determine whether it aligns with your values. “You don’t have one goal in life,” Oden says. “You have multiple goals.” And defining what you’d like to achieve with your money can make the process of creating a viable budget much easier.
When setting financial goals, people can make the mistake of limiting themselves. It doesn’t have to be paying off debt or saving for retirement. Financial goals can be large or small – from saving for a modest purchase to splurging on a luxury vacation – and mixing in some short-term goals can help keep you motivated.
- Consider investing in cryptocurrency.
It might not be the best fit for you, but it’s at least worth learning more about the world of crypto assets. Protecting your assets is just as important as selecting the best cryptocurrency to invest in. “If nobody knows you have it, it’s gone,” Nathaniel W. Birdsall, senior counsel at Proskauer Rose in New York, told U.S. News. “Somebody has to find those keys and know what they mean. It’s not good if your grandma cleans out your closet and finds that string of numbers on a piece of paper and doesn’t know what they are.”
- Start investing in Foreign Exchange.
Foreign exchange (forex, or FX for short) is the marketplace for trading all the world’s currencies and is the largest financial market in the world. There are many benefits of trading forex, which include convenient market hours, high liquidity and the ability to trade on margin. Forex trading promises vast rewards if you take your time to learn well and start trading consistently. The main reason why it is attracting many investors is because of the potential to earn bountiful profits.
It is also accessible for the average investor who can trade small amounts of money at any time of the day. All investors trade at a level playing field regardless of whether it’s a multinational company or a single investor. No one can manipulate the market.
- Create and Stick to a Budget
It’s impossible to anticipate every expense that could arise in year, but a big picture budget can help you prepare for costs that come up every year. Budget for that car repair or home repair you know is on the horizon, prepare for birthdays and holidays, and consider how your income might change throughout the year. To budget for the long term, you need a system. Whether it’s a spreadsheet or a budgeting app, put a plan into place to maintain your budget throughout the year. Use budgeting apps to manage bills, credit cards and saving.
However, the reward for sticking to a budget is having cash available to spend on those items most important to you. What’s more, it will be easier to follow a budget that is written with your priorities and goals in mind.
- Establish an Emergency Fund
Experts typically recommend individuals maintain three to six months of expenses in a liquid, easily accessible emergency fund. This money can be used to cushion the blow of an unexpected job change, take care of repairs following a storm or cover any other necessary expense that could not have been foreseen. The best way to create this fund is to include savings in your budget. How much you save depends on how much extra money you have available, but a common rule of thumb is saved 10% of your income for emergency savings each month with the goal of reaching an amount equal to about three to six months of your typical expenses.
Regardless of how much you can save, make it a habit. Set up direct deposit or automatic transfers into a savings account to ensure you get paid before money is eaten up by other expenses or impulse buys.
- Geton track with your retirement savings
At some point, you may want to retire, and that will be hard to do without a retirement fund.
Small increases in savings can lead to significant results when the magic of compound interest has time to do its thing. Consider bumping up your retirement savings rate 1% this year and compare your savings rate to benchmarks for your age range. If you’re not quite hitting your retirement savings goal yet, save what you can and consider ways to adjust your spending to accommodate a higher savings rate.
Workplace retirement plans can be a good place to save for retirement, since contributions are automatically deducted from payroll. Plus, many employers will match a portion of their workers’ contributions, further boosting retirement savings.
Sticking to a budget, making wise spending decisions, and communicating the reasons behind your decisions are all ways you can instill important money lessons through your own behaviors. As an adults, you may just be starting to come into financial independence, but you have plenty of opportunities to improve your money management skills and develop healthy financial habits that will benefit you for the rest of your life.