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Personal Finance: Good Money Habits to Start Now

Personal Finance: Good Money Habits to Start Now

Personal Finance: Good Money Habits to Start Now

“I just got my tax refund, time to go on vacation!” I can’t tell you how many times I heard this growing up and now I see it daily on social media. I recognized early on that the way I handled money was very different from most people I knew. It has always puzzled me because I have never quite understood how you could spend money without thinking about saving or retirement. Here are some basic habits you can start now to help ensure your financial security in the future:

1. Saving for retirement as early as possible is the most beneficial thing you can do. Even if it’s only $50 a month, which is the minimum for most plans, you could be setting yourself up for thousands upon thousands of dollars in retirement. The sooner the better. For example, a 25-year-old who saves $200 a month until age 65 and earns exactly 6% of the funds saved annually would have accumulated about $400,000. But a 40-year-old contributing the same amount each month at the same earnings rate would have accumulated just $139,600 by age 65.

2. Never carry a balance on a credit card with an interest rate. This is one of the fastest ways to get into an amount of debt that could burden you for the rest of your life. When you need to use credit and can’t pay in full each month, look for a 0% interest card. Many promotions are from six months to a year or more. If used responsibly, they are essentially a free loan. Just make sure you pay off your entire balance before the end of the term or you’ll end up with retroactive interest that could add hundreds of dollars (if not more) to your obligation.

3. Instead of buying a new car or leasing, try saving up and buying a good used car for cash. What you save between interest, amortization, taxes, plates and insurance will save you thousands. According to Edmunds.com, buying a car that is two years old is the best option to avoid the biggest drop in depreciation. Owning it for three years and then selling it will also benefit you because you see another big drop after five years due to the long-term maintenance that is generally required at this point. If you can’t afford a two-year-old car without taking out a loan, then getting a slightly older one with long-term maintenance repairs (and low miles if possible) is your best bet.

4. Avoid eating out if you can. The average American eats out 4 to 5 times a week with an average spending of $232 per month or about $2,700 per year. If you stopped eating out for two years, you would have saved enough to buy a nice used car like point three above.

5. Last, and certainly the most important, is to think long term. The worst way to justify the expense is to do it individually versus the monthly or yearly aggregate. For example, eating out: While it may only cost you $10 to eat out, keep in mind that if you ate out three times a week for a year, you would have spent over $1,400. This same logic can be applied to pretty much anything: clothes, vacations, furniture, coffee, expedited shipping, etc. When you’re about to spend money, think to yourself, okay, how much is this going to cost me each year.

#Personal #Finance #Good #Money #Habits #Start

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