Despite how completely different people appear to be, they have similar concerns for the most part. They have worries about student loans, finding a good job, mortgage, and general life concerns. Except you have an estate passed to you or you are just a recipient of a significant bulk of wealth, you have to plan your finance.
Thus, you have to become smart about money. There are common recommendations made by most financial advisors to help you improve your finances. These recommendations, if diligently applied, should assist in making you financially free and personally fulfilled.
Identify Your Financial Goals
First, you have to become more thoughtful about your life and goals. You cannot hit a target you cannot see, it is always said. What do you want to accomplish? Are those things that are important to you? What are your financial goals?
Instead of just flowing with events that happen in your life, you become a creator of them when you identify your goals. Do you want a new house? At what age do you plan to retire? How do you intend to finance the schooling of your kids? Do you have enough of an emergency fund? Thinking about, and answering these questions will give you a definite roadmap for your life and finances.
Budget, Live On Less Than You Make and Save
Next, consider your budget. You should live on less than you make. Not doing so can land you in a lot of debt. Also, saving is another recommendation made by most wealth advisors. Saving is good, and even gets better if it is started early. Compound interest and time can help you grow your savings considerably with only minimal effort from you.
Kate Ryan, a wealth management advisor with TIAA once demonstrated that if you save $125 a month, after 40 years, assuming an annual return of about 6%, you will have $232,000. The 50/20/30 Spending and Saving Rule can easily help you to achieve this. This rule recommends that you spend 50% of your income on your living expenses and essentials such as mortgage and utilities, 20% on savings and investments and 30% on personal desires such as travel and entertainment.
Invest At Least 15% Of Your Income
Do you wish to retire a millionaire? Then start investing at least 15% of your income in a simple portfolio and do not increase your expenses when you get a raise. The portfolio can be made of stock, real estate, and bonds as well as some other investment vehicles. The money will be working for you instead of you working for it.
Pay Yourself First By Investing Your Income Raise
Also, when you get a rise in pay, what would you do? Instinct may dictate getting a bigger house or buying a new car, but these will only increase your expenses. Instead, pay yourself first! This advice is simple, but its execution can be tough. However, if it is properly executed, it can make you a millionaire.
Check Your Credit Card Scores And Automate
Moreover, always check your credit card scores and the underlying history as they affect your chances of securing loans or mortgage and also determine your premiums when taking insurance. Finally, all those processes can get daunting sometimes. You should consider automating them by using apps such as Stash and Acorns. For instance, you can set up automatic transfers for your savings and investments whenever you are paid.
Those common recommendations from wealth advisors may seem simple. However, they are powerful. Implementing those common recommendations from wealth advisors will firmly set you on the path to becoming financially free.