Can you successfully manage my personal finances in today's economy? Yes you can!
Most people understand and are told that the key to long-term financial success and stability is to live below their means, have an emergency fund, pay off credit cards and student loans, and save and invest for your future. These things are tough to accomplish today with the demands on your money.
In the years ahead, many opportunities will arise for you to take smart actions to help assure your future financial success. It may seem like a far-off project when you are in your 20's, but the personal financial habits that you put in practice will help you manage and accumulate money in the years ahead.
In today's world, you are consistently bombarded by messages, posts, tik tok's suggesting that you can spend and borrow your way to financial success and wealth. These are ALL wrong, because you can't!
In truth, while these messages can be enticing, overspending and overuse of consumer credit can seriously impact financial success. YOU are the result of your financial decisions. If you have bad spending habits then that is who you are.
Many people think that being wealthy is a function of how much you earn or inherit. In reality, it is much more closely related to your ability to make good decisions that generate wealth for you.
Live within your means and delay gratification to make the right decisions to succeed in your finances. So long as you don't do too many things wrong, you only need to do a few things right to have financial success.
There are 5 fundamental steps in the financial planning process:
Evaluate your financial condition relative to your education and career choice
Define your financial goals
Develop a plan to actually achieve these goals
Periodically develop and implement spending plans to monitor and control your progress towards these goals
Review your financial progress and make changes as needed
At any financial level, individuals can start making decisions that will help them control their finances in the future.
Allison Wang, age 23, recently graduated with a bachelors degree in education. While she was in school, Allison worked part time at a coffee shop earning about $15,000 per year. In the two years she worked, she managed to put $1,000 a year into an individual retirement account (IRA). Allison also owes $35,000 in student loans which she will need to start paying back soon.
Her choice to save $1,000 a year would net her over $122,000 in 40 years if all she did was continue that.
Lauren Wilson, age 25, earns $50,000 a year and invests 6% of her salary into a company sponsored retirement plan at 6% per year. Her employer also contributes 50 cents for every dollar she contributes. Lauren is saving $4,500 per year ($3,000 + $1,500).
If she never increased her contributions in 40 years she would have about $1.1 Million because of the power of compound interest and her choice to start saving early.
As the Jedi master Yoda once told Luke Skywalker, "You must unlearn what you have learned." The world is changing and we need to recognize that some of the information we have been receiving all our lives from family, friends, and even tik tok is obsolete.
We need to move past that outdated knowledge and start taking control of our own personal choices and apply our goals to the way we specifically need to manage wealth for our life.
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