Personal finance and that especially for young professionals is very important if you want to have a financial security. There are chances that you are thinking of buying a new car or house, paying school loans or even saving for your future. May it be long term or short term, the secret is to start with a personal finance at home.
Create a budget
Before you make any financial decisions like making purchases or going for a holiday, you need to lay down a budget that takes into considerations your income, all your expenses and any debt you may have as it will help you prioritize on what to spend on and what to ignore. You don’t need to spend more than your total income. Optional expenses can be ignored or go for cheap providers like Sky Broadband and deals for home broadband. Important expenses like paying bills that must be paid in order to survive cannot be ignored. Before you think of buying that iPhone, consider if it’s that essential or it’s just for pleasure. To have a working budget, you need to take your total earnings and subtract the living expenses, things like mortgage and medical bills and any other thing that you must pay for, if you have money left over, prioritize how to spend it and how much you should save.
Create an emergency fund
Consider building an emergency fund before you start paying off additional debts as it will enhance your personal finance. Planning for unexpected expenditures is very critical as it can have severe financial implications. Think of the difficulty of losing a job or an illness if you don’t have enough savings to support yourself. It’s advisable you put away some money for such events. Consider opening a separate bank account and put that money in, so you don’t unintentionally dip into it. In case your employer offers, join and enroll for automatic salary deductions so that you don’t even remember about saving. If you set up a separate bank account, you will have to think twice before withdrawing money from it to spend on luxury purchases or unnecessary things.
Contribute more to your retirement savings
If you still have money to spare after all those expenditures, consider increasing the amount you put on your retirement savings account. The benefits are much higher when growing your long term investments than you would get from paying off lower interest rate debt like student loans and mortgages. The goal is to contribute as much as you can after paying of important bills, instead of paying tickets for a concert, put that money into your retirement savings account. Every time you get that bonus money or a raise, consider increasing your retirement savings percentage and your personal finance will be greatly enhanced.
Check your interest rate
Consider paying off loans with the highest interest rates first and open a savings account with the best interest rates. Paying attention to interest rates will help you inform which debt or savings obligations you should focus on first.
Don’t rush to buying properties
Buying your own house is equally important as compared to renting over but you should avoid rushing in to buying a house until you have proven your earning power. Reflect on where you want to live and have a clear picture on the kind of a life partner you will have. Buying and selling properties may hinder your personal finance if you have to sell at a time when the value of the property has fallen.
Choose the right insurance
Insurance serve as a cover up for risks in your life so don’t confuse it with investments. It’s important to know the various types of insurance at the start of your financial life. In case of illness insurance will cover for your bills so you won’t need to dip into your savings. Make a wise decision today by opting for the right insurance.
Avoid debt traps
Personal finance starts when you avoid meaningless debts. Learn to differentiate wants and needs.You don’t need a degree to become an expert in personal finance. It starts at home with you and you could become as successful in personal finance as that person with a MBA.