It is strange how we as adults claim to know a lot about money but still fail at managing our finances somehow. Thanks to firms like Lucky Loans, we can always manage to get past our short-term problems and achieve our goals. Still, there are many finance lessons that we could learn. Here are a few of them.
Spend less than you earn
The basic idea behind every personal finance advice is to spend less and earn more. If you can manage to save 10 to 20 percent of your income each month, consider yourself lucky. If you save anything more, you are among the most disciplined people in the world. You will be surprised to know how many people have no idea that this concept even exists.
We are so trapped in the world of marketing gimmicks and temptations that momentary satisfaction that we get on buying things often appears better than saving for a better future. Don’t make this mistake. In case of emergencies, you will be really hard pressed for cash and nothing, but your own personal savings will be able to help you.
Budget on post-tax dollars
Budgeting is one of the most difficult tasks for a few people. Some even try to make stupendous budgets but end up feeling overwhelmed. Even upon following the budgets, they often end up in hot waters. To get a budget that you can follow, calculate only on your post-tax dollars. Simply determine your tax liability and divide it by 12. Now, deduct it from your monthly income. Create a budget on the leftover amount only.
The tax liability should be saved over and above your 10% saving allocation in the budget. This will keep you safe from financial emergencies and you will never have to bother about paying taxes ever again. Just get the money from your savings account, pay the tax dollars, and go on with your life as usual. The last thing that you want to do is be late on your tax payments. This could land you in a lot of trouble, and it can so easily be trouble that can be avoided in the first place. You could even end up in a situation whereby you have that much money to pay to the IRS that you need to sign up to something like this fresh start program to help taxpayers who owe a significant amount of money. Though this is an essential lifeline, paying for your taxes with any money that you have saved as part of your budget is a lot easier than navigating the alternative.
Autopilot your savings
Never wait to save. If you believe that you will help your expenses first and save some money for later, you are living in a delusion. It is always better to put your savings on autopilot. Always ensure that you have auto debit facility on your checking account. As soon as your account is credited with your salary, a small sum should be debited to a separate savings account. You should not touch this account unless necessary. Keep building a small fortune and earning some good interest on your savings as well.
Don’t be intimidated
It could be easy for you to feel intimidated and overwhelmed when you have too much financial advice around you. The best way forward s to find some simple principles that you can follow and forget the rest. As long as you are following a few simple rules religiously, you wouldn’t have to worry about other things.
Do you think you will be able to follow these principles? Even though most of them are common knowledge, they are not followed by most people, leading to financial troubles later in life.