No matter what age you are, you will most likely not have a full understanding of the financial world, and how it works. When you’re young and in school, you simply aren’t told about these things, and you are expected to simply pick up these life skills later on in life when you become an adult.
Fortunately, there are plenty of resources available online for you to research into. This article will explore certain elements of the financial world, as well as how you should be spending your money, if at all.
Lower Your Lifestyle Costs
Firstly, when thinking about your financial future, you may benefit from understanding the reasons behind lowering your lifestyle costs. If you aren’t sure, this essentially refers to the practice of adjusting your lifestyle and the choices you make, to save money. This can come in a few different forms, depending on how you live your life.
Let’s say you go out every weekend to a bar to meet with friends. You may find that you are spending a lot on alcohol that you don’t need to be doing. That’s not to say that you need to completely cut alcohol from a night out, just that you can still lower your spending whilst having a good time.
That means looking into deals at a bar that means you could get more alcohol at once but saves you spending more in ten minutes. It’s important to note that you don’t need to drink alcohol on a night out with friends, you can just have some water or even a soft drink, the main thing is that you’re with people that you want to be with, and can have a good time.
Your lifestyle can also be changed away from nights out, with the types of food you buy from the stores. What you may not realize is that there is a range of own-brand products you can buy from a grocery store, that offer the same quality as a household name brand, with no difference in quality.
So next time you go to the shop, consider looking into discounted products over a month, to see how much you have saved. You may be surprised to see how much you have saved.
Track How Much You Spend
Leading on from the last point, you should be tracking all of your finances wherever possible. There will be a few different ways to do this, from tracking how much you spend at each store via receipts, to utilizing a separate spending account. Some people take this further and look into using an app on their phone that tracks it for them or even uses an excel spreadsheet.
Everyone will have a different way of being able to track their spending, so it’s worth messing around with a few different ideas and concepts to find what works for you. When you can track how much you are spending, then you will be able to see how much you can cut, and what expenses you simply don’t need.
The money you spend can be categorized into a few different categories, from essential spending to non-essential spending. In most cases, you will be able to significantly lower how much you spend when you keep track of it, as you will be more aware of it.
Be Wary Of Borrowing
Something that a lot of people aren’t taught at any point, is how borrowing works. Borrowing works in a few different ways, from conventional mortgages to payday loans. With personal loans, you will have to be careful of the interest rates, which can get quite out of hand if you’re not sure what you’re looking for.
One thing that you should avoid, is borrowing money simply to finance your lifestyle, as it could mean you’re in a position that means you aren’t able to pay it back. When you aren’t able to pay back the money you borrow, then that’s what leads to high amounts of debt, and can ruin your credit score.
There are more positive loans available that you could look into. For example, purchasing a home will usually mean you need to borrow money via a mortgage. However, how a mortgage works are more positive, as you get home instantly in return for entering into a mortgage agreement.
You will still need to put down a down payment for the home, unless you can qualify for a specialized unique loan, such as a veteran-backed loan. As you have enough money for a down payment, and a decent credit score, a bank or lender will purchase the house on your behalf, putting you into a credit agreement where you pay back a set amount each month.
In most cases, this monthly repayment will be an amount that you can afford to pay back, as you have already had your finances analyzed and approved. With all that said, you will need to be wary of borrowing in general, and never borrow what you know you can’t afford.
Set Financial Goals
Generally speaking, you should be looking to set financial goals in your life. These goals can be short-term, as well as long-term. As life can hold many mysteries and changes, it’s good to have a set plan in life, as it gives you meaning and ideas to focus towards.
Small-term financial goals could relate to paying off any debt you have. For example, you may have some credit card debt that has built up over the years. You could set yourself a date to pay this off, creating a scheduled payment plan to pay it off each month. This will also be good for your credit score, as paying off debt and credit regularly is seen as a positive move.
Setting financial goals also gives you a better chance of achieving them, as it is much more set in stone than just saying it. You could set up a timetable, or write it down, to make it appear more real.
Make Smart Investments
Something that everyone should look into at some point, is making smart investments. The point of having investments is that you can put money towards something, for it to bring you more money in the future.
Smart investments can come in a few different forms. For example, if you purchase a piece of property away from your home, then you could rent it out to someone, or a family. This means that you can have money coming into your bank account each month, netting profit from your mortgage repayments.
This is known as passive income, and can help you to build up more money for your future, and start something known as your investment portfolio. This portfolio will consist of several different investments that you have, from stock investments to cryptocurrency.
Cryptocurrency is becoming a more important asset to an investment portfolio. Crypto can come in a few different coins, from the now-famous Dogecoin to the classic Bitcoin. What you may not know about crypto, is that you will need to utilize digital wallets to store your coins safely and securely.
There are a few different ways in which you can do this, for Bitcoin wallets in Canada, you should look into Wealthsimple, which offers a range of software programs available for consumer use, as well as business use. These wallets will be available on either desktop, mobiles or even tablets.
Investments can help secure your future, as it’s money that you’re investing into yourself in many ways. Rather than spending money on a one-time purchase that will be used up fairly quickly, you will purchase something that will eventually pay off.
Research Financial Management
Generally speaking, you should be researching financial management as a topic. This will help to serve you throughout life, as you will understand why finance matters in society away from your personal life. Consider speaking to a financial guru for advice, as well as engaging with financial courses.
Put Money Aside For Your Future
You may be familiar with the idea of putting money aside for your future, in terms of pensions and social programs, but it’s worth being aware of how they work. Pension programs work in several ways, from government-backed programs to private company ones.
It can be automated, where money is taken from your payslip each month and automatically entered into your future pension. This pension will then not be accessed until you have retired, where you will receive a part of your income further on in life. In some cases, there may be other contributions made to your pension from other sources.
Set Up An Emergency Fund
Lastly, you should have money put aside for a rainy day. This means that if there is ever an emergency, such as your car being broken or a medical emergency, you will be best equipped to afford it without going bankrupt. That’s because it won’t affect your main finances and keep your income strong.