Personal finance is not rocket science, yet many Americans seem to struggle with this area of their lives. Figuring out personal finance is the only way most people will be able to get ahead financially. Most of the main ideas related to personal finance are pretty easy to grasp. They just take discipline to implement.
The average American will live to nearly 80 years of age. There are many who will live to 90 or above. That's why it's important for you to imagine the 80-year-old you. Will the person you'll become comfortable with the financial path you're on? If not, there's still time to make some proactive changes that can improve your financial situation. This might mean delayed gratification in some areas. If you can't pay for something, don't go into debt.
One of the worst things you can do when trying to get ahead financially is building debt rather than wealth. It's easy to go into debt for a new car, a new kitchen or a nice vacation. Avoid that temptation. You'll pay a bank for the privilege of going on that vacation. If you save up for big purchases, you'll be better able to avoid building up massive amounts of debt. Additionally, it's a good idea to stay away from student debt as much as possible. This might mean living in the dorms or commuting from your parents' home. It will be worth it when your friends who partied their way to massive debts are still paying off their loans while you can start to build wealth.
Setting up a budget is one of the most-repeated tips that inhabit the personal finance space. There's a reason that this advice is so common. First, setting up a budget can work. Second, few people actually get around to filling one out on a monthly basis. It's pretty hard to tell where your money is going if you don't have a budget and actually track where it goes each month. When setting up a budget, make sure that you set aside some money for savings.
Another common piece of financial advice recommends that you pay yourself first. Even those who never go into debt will never build wealth if they spend every available dollar. You'll need to put away some money each month to start building wealth. If your employer has a traditional pension plan, some money will automatically go toward your retirement. If your employer does not have such a plan, be sure to save in a 401(k) if it's available. Even those who cannot save in an employer-sponsored plan can contribute to an IRA each year as long as their income is not too high.
Some employer-based plans control the investments of their employees, but most will allow some level of employee control. Taking advantage of low-cost index funds is a good idea. If you decide to invest in an IRA, a self-directed IRA can be a good option. Also known as a checkbook IRA, a self-directed IRA allows account holders to choose from a wider range of investment options. This could involve everything from cryptocurrency to real estate to NBA Finals tickets. All investments come with risks, but controlling where your money goes can help you make money through investing in what you actually know about.
Saving for the future is key. By taking control of your finances early, you can start to build wealth and allow the power of compounding to work its magic. It's important to remember that spending every dollar you make will never allow you to achieve a meaningful level of financial independence. That's why you'll need to start saving as soon as possible.