SOUTHERN CAPE NEWS - There is no better time to improve your financial life than to start right now.
To help you, here are some helpful money tips – from the best ways to budget to how to boost your earning potential like a pro, these nuggets of financial wisdom are everfresh.
Create a financial calendar: If you don't trust yourself to remember to pay your taxes or periodically pull a credit report, think about setting appointment reminders for these important money to-dos in the same way that you would an annual doctor's visit or car tune-up.
Check your interest rate: Which loan should you pay off first? The one with the highest interest rate. Which savings account should you open? The one with the best interest rate. Why does credit card debt give us such a headache? Blame it on the compound interest rate. Bottom line: paying attention to interest rates will help inform which debt or savings commitments you should focus on.
Track your net worth: Your net worth – the difference between your assets and debt – is the big-picture number that can tell you where you stand financially. Keep an eye on it, and it can help keep you apprised of the progress you're making toward your financial goals, or warn you if you're backsliding.
Set a budget, period: This is the starting point for every other goal in your life.
Consider an all-cash diet: If you're consistently overspending, this will break you out of that rut.
Take a daily money minute: This one comes straight from LearnVest Founder and CEO Alexa von Tobel, who swears by setting aside one minute each day to check on her financial transactions. This 60-second act helps identify problems immediately, keep track of goal progress – and set your spending tone for the rest of the day!
Allocate at least 20% of your income toward financial priorities: By priorities, we mean building up emergency savings, paying off debt, and padding your retirement nest egg.
Budget about 30% of your income for lifestyle spending: This includes movies, restaurants, and happy hours – basically, anything that doesn't cover basic necessities. By abiding by this rule, you can save and splurge at the same time.
Draft a financial vision board: You need motivation to start adopting better money habits, and if you craft a vision board, it can help remind you to stay on track with your financial goals.
Set specific financial goals: Use numbers and dates, not just words, to describe what you want to accomplish with your money. How much debt do you want to pay off, and when; how much do you want saved, and by what date.
Adopt a spending mantra: Pick out a positive phrase that acts like a mini rule of thumb for how you spend. For example, ask yourself, "Is this (fill in purchase here) better than Bali next year?" or "I only charge items that are R500 or more."
Love yourself: Sure, it may sound corny, but it works. Paying off debt and taking control of finances is a way to value yourself.
Make bite-size money goals: One study showed that the further away a goal seems, and the less sure we are about when it will happen, the more likely we are to give up. So in addition to focusing on big goals (say, buying a home), aim to also set smaller, short-term goals along the way that will reap quicker results – like saving some money each week in order to take a trip in six months.
Banish toxic money thoughts: Hello, self-fulfilling prophecy! If you psych yourself out before you even get started ("I'll never pay off debt!"), then you're setting yourself up to fail. So don't be a fatalist, and switch to more positive mantras.
Get your finances – and body – in shape: One study showed that more exercise leads to higher pay because you tend to be more productive after you've worked up a sweat. So taking up running may help amp up your financial game. Plus, all the habits and discipline associated with, say, running marathons are also associated with managing your money well.
Learn how to savour: Savouring means appreciating what you have now, instead of trying to get happy by acquiring more things.
Get a money buddy: According to one study, friends with similar traits can pick up good habits from each other – and it applies to your money too! So try gathering several friends for regular money lunches, paying off debt in the process.
When negotiating a salary, get the company to name figures first: If you give away your current pay from the get-go, you have no way to know if you're lowballing or highballing. Getting a potential employer to name the figure first means you can then push them higher.
You can negotiate more than just your salary: Your work hours, official title, maternity and paternity leave, vacation time, and which projects you'll work on could all be things that a future employer may be willing to negotiate.
Make salary discussions at your current job about your company's needs: Your employer doesn't care whether you want more money for a bigger house – it cares about keeping a good employee. So when negotiating pay or asking for a raise, emphasise the incredible value you bring to the company.
Start with small debts to help you conquer the big ones: If you have a mountain of debt, studies show paying off the little debts can give you the confidence to tackle the larger ones. You know, like paying off a modest balance on a department store card before getting to the card with the bigger balance. Of course, we generally recommend chipping away at the card with the highest interest rate, but sometimes psyching yourself up is worth it.
Don't ever cosign a loan: If the borrower – your friend, family member, significant other, whoever – misses payments, your credit score will take a plunge, the lender can come after you for the money, and it will likely destroy your relationship. Plus, if the bank is requiring a cosigner, the bank doesn't trust the person to make the payments. Bonus tip for parents: If you're asked to cosign a private loan for your college student, first check to see if your kid has maxed out federal loan, grant, and scholarship options.
Opt for mortgage payments below 28% of your monthly income: That's a general rule of thumb when you're trying to figure out how much house you can afford. Learn more about this number here. And then indulge in some voyeurism and see what other couples can afford.
Evaluate purchases by cost per use: When deciding if the latest tech toy, kitchen gadget, or apparel item is worth it, factor in how many times you'll use it or wear it. For that matter, you can even consider cost per hour for experiences!
Spend on experiences, not things: Putting your money toward purchases like a concert or a picnic in the park – instead of spending it on pricey material objects – gives you more happiness for your buck. The research says so.
Shop solo: Ever have a friend declare, "That's so cute on you! You have to get it!" for everything you try on? Save your socialising for a walk in the park, instead of a stroll through the mall, and treat shopping with serious attention.
Spend on the real you – not the imaginary you: It's easy to fall into the trap of buying for the person you want to be: chef, professional stylist, triathlete.
Ditch the overdraft protection: It sounds nice, but it's actually a way for banks to tempt you to overspend, and then charge a fee for the privilege. Find out more about overdraft protection and other banking mistakes to avoid.
Start saving for retirement ASAP: Not next week. Not when you get a raise. Not next year. Today. Because money you put in your retirement fund now will have more time to grow through the power of compound growth.
Do everything possible not to cash out your retirement account early: Dipping into your retirement funds early will hurt you many times over. For starters, you're negating all the hard work you've done so far saving – and you're preventing that money from being invested. Second, you'll be penalized for an early withdrawal, and those penalties are usually pretty hefty. Finally, you'll get hit with a tax bill for the money you withdraw. All these factors make cashing out early a very last resort.
When you get a raise, raise your retirement savings, too: You know how you've always told yourself you would save more when you have more? We're calling you out on that. Every time you get a bump in pay, the first thing you should do is up your automatic transfer to savings, and increase your retirement contributions. It's just one step in our checklist for starting to save for retirement.
Review your credit report regularly – and keep an eye on your credit score: A less-than-stellar credit score has the potential to cost you thousands. An actual credit score can tell a different story.
Keep your credit use below 30% of your total available credit: Otherwise known as your credit utilisation rate, you calculate it by dividing the total amount on all of your credit cards by your total available credit. And if you're using more than 30% of your available credit, it can ding your credit score.
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