Finance can be a daunting topic that many people are scared to discuss, especially when they are worried about their own finances. It is important to realize that money is not very complicated, only creating healthy money habits can be difficult, but with a little education and some motivation, one can tell their money exactly what they want it to do.
The first thing we must understand is that a person’s working years are limited, but the years a person’s money can work are unlimited. We must also note that while we may be able to earn enough money to pay for all our bills and save some money while we are in our working years, we would have to earn approximately double what we spend in our working years in order to live on our savings when we retire. With these two pieces of knowledge in our minds, we can work on solutions to improve our financial situations in the years we are willing and able to work a “regular job”, and for all the years afterwards.
When a person has money in their pocket, and they think that it’s extra in some way, they are much more likely to spend that money on something which they otherwise would not have purchased. If a person decided that every dollar which they earn should have a specific use, whether that is to pay for something they need now, or to put it away for the future, they would be less likely to decide any dollar was “extra”. In order to do this you need to take the time to create a budget and a plan for every dollar that you earn. This will include all the necessities, some of the things we would like to have, and putting money away for later. If you find that your budget is costing you more than you earn, you need to find ways to earn more money or to spend less. For one person this may mean they get a side job or sell some things, for another person this may mean getting a cheaper car or eating out less often. Every person has a different situation and needs to make these decisions accordingly.
Once you have all you basics in order, and you have some money that you are saving we can start planning for the future. The first thing you should save for is an “Emergency Fund”. This is so important and can save a person from so much stress. I know a family that had only one person working, and that person lost their job and was not working for over two months. This family had put away enough money to get them through almost six months of expenses based on what their budget was. This saved them from worrying and being scared and taking a bad job just because it was the first one to be offered. Just like this family, you should save up at least three months worth of your expenses so that if you lose a job, your water heater breaks or your car dies, you are not adding big expenses that you don’t have money for.
If a person invests $10,000 when they are twenty years old and gets a 7% return annually, when they are fifty years old they will have $76,122.55. If the same person were to wait until they were thirty years old by the time they were fifty they would have $38,696.84. That’s $37,425.71 less than if they had invested ten years earlier. Almost half the money is earned in the last ten years. There are so many ways in which a person can invest their money. You can start a business, stocks, bonds, mutual funds or real estate. The only thing that is important is that you understand what you are investing in and saying “My friend said this stock is good”, or “My uncle told me it was a good deal”. Invest in things you like. Invest early, invest often. Many of these things take sacrifices, some will be small, and some will be larger sacrifices, but if you are consistent and don’t give up, your money will do all the hard work for you for many years after you are finished with your hard work.
