5 Steps Towards Achieving Financial Freedom and Control

Money is a constant source of restlessness and stress. It casts its long shadow over every aspect of our daily lives. Regardless of one’s income, achieving financial freedom is ultimately a matter of control. Even in today’s age of consumerism where money seemingly reigns supreme on top of everyone’s list of priorities, there are steps to be taken.

Here are some of the measures you can apply to handling your finances. Again, the key word being – control.

Financial planning

 

A key step towards achieving financial freedom is having a strict plan. Hence, write down your budget for the month ahead. The best way to organize your budget is listing all of your expenses. That means accounting for each penny you spend on a monthly basis, and then assigning it to three different categories. The first one would be the core necessities, such as food or shelter. Second category contains items you could very well do without (e.g. a new car), but which improve your life(style). Thus, you will not be too eager to get rid of them that quickly. Third category is where you should begin, in terms of removing the costly and unnecessary. It basically contains impulse purchases which have a way of fooling us into believing that we in fact need them.

This way of thinking will help you prioritize. And, since you will be planning ahead, you will lose the burden of having to decide about your expenses as you go along. It is the very first hint of the freedom we are trying to achieve.

When writing your budget, make sure that each member of your household is involved. If each person making and spending the money is part of the plan, controlling your finances will be easier, too. It may sound complicated, but if you include even your children, it will help teach them about financial freedom from a young age, and benefit them later on.

When you start running your monthly finances by this principles, we advise you to review your budget on a daily and weekly basis. By doing so, you will be able to determine whether your projections have been realistic. Remember, it’s not too late to adjust your budget as you go along until you come to a final version.

If possible, when you create your budget, set aside a certain amount for emergencies. That way, you will be able to remain within your plan even in case of unforeseen circumstances.

Invest in yourself

 The key to investing is NOT viewing it as some abstract, complicated, business-y affair. Instead – and that’s the trick – look at it as paying yourself.

Besides, there are plenty of easy-to-use online platforms and tools making investing simpler than ever. And there are various ways of paying yourself and thinking about the future. Some of them include starting a business, investing in real estate and retirement plans. When you scratch the surface and demystify what investing can essentially be, you’ll learn how to benefit in the long run. You can do so by allocating just a small fraction of your income.

Get rid of debt

 

There are many forms of debt – credit card, student loan, to name a few. With them looming over your head, you will never sustain complete financial freedom. Also, it is difficult to make any kind of strict budgetary plans if your debts are making them for you.

There are many helpful tools and strategies to free yourself of debt. For instance, Total Money Makeover by Dave Ramsey or Debt-Free: JFM’s Story of Overcoming Debt.

Prioritize the essentials

 

Identifying all the material goods in your life that are basically non-essential will open another path towards financial freedom. Start with the big ones. Do you need an extra room in your house, or do you need two cars at this moment in your life? Why not sell those excess material possessions online, even the smallest items? You will clear a physical and financial space in your life.

 

Perspective and giving back

 

The final tip relates not as much to concrete material assets, but your time and willingness to contribute. Namely, besides financial aid to the underprivileged, you can also do some community work or volunteering. That way, you will provide yourself with a useful reality check and come to appreciate your situation when seen in perspective.

Wrap-up

 

The purpose of these tips was not to say that achieving financial freedom is easy (it is not). However, we have constructed them in a way that can be equally used regardless of your current financial situation. Remember, it is not just a matter of the size of your assets but rather the way you control them.

 

The most important step is to start planning. Do it right now and your future self will thank you!

 

 

A Billionaire’s Advice on Personal Finance

People do not often ask billionaires for personal finance tips. After all, not many of us can think about money the same way they do. Regular people are trying to stretch their paycheck every month just to cover all the expenses. However, wealthy people have great advice to share with the rest of us. Here are some of the tips which you too can apply to your financial situation.

Start Now

 

Carlos Slim Helú used to top charts of the wealthiest people in the world. Afterward, Bill Gates took over the title again. Nevertheless, he has a valuable tip for all of us who need a bit of support. Slim maintains that it is better to start early or start immediately. Once you begin managing your savings and income, you will have more time to amass your wealth. In addition, you’ll also make fewer mistakes along the way. He started with a few shares at age 12, and by his teenage years, he was earning 200 pesos per week at his father’s company.

Be passionate about it

 

Changing your financial situation takes time. Furthermore, you also have to believe in yourself. Otherwise, you might end up somewhere where you never wanted to be. Oprah Winfrey is an example of a businesswoman who thought that she could – and then she actually did it. That is the first step towards a better life and wealth – believe in yourself.

Apart from that, you should try to find what makes you passionate about life. It doesn’t matter if it’s sewing, or saving animals.

One person who appreciates what he does is Christopher Paul Gardner. When people ask him to tell them his secret, he has a rather simple answer. He says that a person should do something that he loves. If he is passionate about his job or business, then he will enjoy doing it every day, for the rest of his life.

Don’t make it too complicated

 

Warren Buffett made his fortune by investing in companies that have a stable annual cash flow. He didn’t risk it with businesses that might go down due to technical obsolescence.

It might not be the most interesting method of investing, but it worked for him. Therefore, whatever you have in your bank account, use it well. Stick to the fundamentals because they will eventually pay off.

Keep your life simple

 

This next tip might be similar to the previous one, but it still holds a great amount of value. Warren Buffett is, again, a great example. He still lives in the same house in Omaha which he bought for $31,500. Today, that house is worth just a fraction of the price, but he is comfortable there. The aim is to stop wanting things you don’t need. They will only make you financially unstable, and less successful.

Don’t underestimate public transport

 

Public transportation is an everyday thing for the rest of us. But, even billionaires like John Caudwell, David Cheriton, and Chuck Feeney use it. Not only are they saving their money, but it is also more environmentally friendly. They are not ashamed to ride a bike or walk to work – so why should you be?

You don’t need expensive cars

 

If you love cars and are desperate to buy one you have been eyeing for some time now, then go ahead. But, make sure you are staying within your financial limit. Many billionaires still use their older cars to get from point A to point B. Ikea founder drives a Volvo, while Walmart owner still uses his old pickup truck. Just because you can afford it, it doesn’t mean that it is a necessity. Therefore, keep your needs and wants separate, and save your hard-earned money.

Billionaires are still wealthy because they use these tips. When you have that amount of money, it is rather easy to go on a spending spree and forget about your future.

 

However, you will improve your financial situation if you follow their advice. Many of them started with little to no money at all – and look at them now.

 

Money is there to help you make the rest of your life more enjoyable. Therefore, find and do what you love, invest smartly and make your money work for you.

 

Financial Freedom and How it Relates to Your Life

We are all familiar with the usual expectations laid out in front of us in order to be successful. Get a proper education, and seek good employment. Save up and invest in your retirement fund so that you and your family are taken care of. In the meantime, try to progress in every way possible – by getting a larger house, couple of cars and other material possessions.

In such a world, and with those priorities, the vast majority of your time is dedicated to work and moving up the social ladder. Which is all fine. However, what happens if one wants to enjoy the fruits of their labor not in their retirement years, but in their prime?

This is where freedom comes into the equation. By tweaking those set expectations and limitations, you can gain the financial freedom allowing you to expand your options. For instance, take a year off and travel. Or switch your job and start your own business. Freedom relates mainly to choice.

Defining financial freedom

Instead of pursuing the usual “dream” of gaining freedom in our retirement years, let us break down the path towards freedom, one that you can embark on right now.

1 – Status quo

The starting point most of us find themselves in. A vicious cycle of relying on a steady income which pays the bills.

2 – Momentary relief

First sign of financial independence is cutting down your expenses and saving up some funds. These can then be invested, and the profit can be turned into a new regular income source. As your savings increase, so will your freedom. At a certain point, you will be able to start your own business or switch into a new professional field.

3 – Full independence

This is when the income gained by means other than employment surpasses the amount which covers all your expenses. You gain flexibility, which leads to independence. If you can afford to quit your previous job at this point, this means that your side business or investments have provided you with that option. Of course, a side business also implies much work, perhaps even more so. But if, in your case, it reflects your ambitions and desires, it is very much worth it. Remember, it is not a matter of what pays better. We are after something much bigger here – independence and freedom.

4 – The next step

The next and final step is getting to a point where your free savings are comfortably surpass your expenses. For some people this means not having to work any longer and living off their savings. For other, it is a platform for the creation of additional wealth. What’s in common is that reaching it will provide you with even more lifestyle-related options.

Is this the right concept for you?

To answer this, evaluate your current situation: does your current way of life satisfy you, are you happy with the balance between work and free time and does your job fulfill you?

These questions are not only for you to answer, but also for your partner, family, etc. Answering them won’t be easy, but when you do, you will have a much clearer picture. Maybe you’ll come to realize that your current job is perfectly satisfactory. In that case, pursuing phase No. 2 as described above might be what you should aspire to. Or you will find yourself in the large category of people who are not overly enthusiastic about their jobs, but are generally not eager to make any sudden changes. If so, the right way forward would still be to pursue a greater level of financial freedom. That way, you will be able to reevaluate your position and potentially switch careers in the future.

Naturally, if you belong to the group which is absolutely dissatisfied with their current work situation, you should immediately begin pursuing financial independence. In that case, don’t hesitate to make some unpleasant cuts with your eyes on the big picture. For instance, eliminating all unnecessary expenses, or even relocating to a place with lower living costs. It may sound drastic, but if your work makes you unhappy, these are steps worth taking. Just remember that money can be made (and saved), whereas time cannot.

That in mind, the future You will be grateful for every action that you take sooner than later.

How to Create and Manage a Stress-Free Budget

 

 

When asked what their most important personal finance goal is, most people will simply say that they would like to spend less than they make. This is a very good answer, since it allows people to pay off debt, have savings on hand for emergencies, and put money away for a comfortable retirement.

However, saving money can be very difficult to accomplish, especially in these times. There are two main reasons for the inability to save money. Firstly, people may not have enough income to be able to save at all, and secondly, people may be needlessly overspending. Since there is not much we can do to help the first category of people budget better, in this article, we will offer some quick tips for people who fall into the latter category.

  1. Know what the goal is

 People who are averse to budgeting often think that they would have to keep track of every dollar they spend obsessively. While that approach would definitely work, it is not the primary goal of budgeting. The goal is to become aware of what we’re spending money on, and how much each item in our budget will cost us from month to month, so we can plan our expenditures in advance.

  1. Try tracking your spending

 As previously explained, the goal of budgeting is not to account for every dollar you spend. However, doing so for a limited amount of time can give you an insight into the exact way in which you spend money, so that you can plan your future budgets more easily, without having to keep track of everything. This sort of empirical method is sure to give you lots of data on your spending habits, so you should keep at it for about a week or so. If you are particularly zealous, you may try doing it for a month, in order to get a full picture.

  1. Split your budget into 3 categories

 

If you do decide to track your spending for a month, it is more than likely that you will come to the conclusion that you overspend on only a few categories of expenses. People most commonly overspend on eating out, buying clothes, gadgets, and entertainment. With that being said, decide on three of these categories you can forego, in order to bring up the overall health of your budget up.

  1. Use a card

 While most budgeting experts advise cutting up your credit cards in order to save money on the associated interest rates, other types of cards can actually be pretty useful when budgeting. That is because your purchases are recorded electronically, and are therefore easy to access and categorize. To that end, you can use rewards cards, bank debit cards, or prepaid cards, which charge little in terms of fees.

  1. First save, then spend

 Seeing as though the goal of budgeting is to spend less than we make, it is a good idea to save up first before spending. That means that the first item you put in and account for in your monthly budget will be how much you want to save, and then allocate the remainder of your funds according to priority. That way you make sure that you save a set amount of money each month, instead of whatever is left over at the end.

  1. Make use of th 50/20/30 plan

 This plan was popularized by U.S. Senator Elizabeth Warren in her book All Your Worth. Basically, it splits the overall budget into three categories: the first 50% should be spent on necessities, 20% on long term savings, and 30% to lifestyle items. This is great advice for first time budgeters who need a framework to start them off. 

  1. Use the tools available to you

 

There is a whole world of different tools to help you with budgeting nowadays. While it can’t be said that any budgeting app is the best, as they all have their pros and cons, you will certainly be able to find one that suits your style and your needs best. These are useful for several different reasons.

Firstly, they can connect to your bank account and credit cards, in order to keep track of and categorize all of your purchases, which helps you plan ahead. The second major advantage is the fact that there is some external support to help you keep at it when you waver!

 

Investing 101: Clever Tips for New Investors

One common misconception is that it takes a pre-existing wealth to start investing. Actually, a spare sum of, say, $50 can be your entry ticket into the world of return-yielding investments. Also, apart from the stock market, there are other methods, too. Each comes with a different set of options, risks and interest rates. Choosing the right one will depend on your proficiency, namely whether you’re a seasoned investor or just getting started. And, most of all, the financial resources at your disposal.

A major piece of advice for the beginner would be not to use up the bulk of his/her savings for investing, especially since low-risk investments take time to make a profit. Be advised that this period can take years. Hence, a well-thought out investment plan would imply always keeping an adequate sum as a reserve.

Here are some practical tips for a beginner aiming to avoid investing in the stock market. If you prefer to invest in the stock market, you can use tools like StockTwits and the Finviz screener to find better stocks to trade. We will highlight some that are considered both profitable and safe:

Investing in real estate

Investing in real estate will require a sum much larger than the aforementioned $50. However, it is a market that yields large profits, and is considered a safe investment. Namely, when you invest in a tangible asset (real property), you can be certain that it will be sought-after in the future, hence profitable.

There are several ways to go about jumping into the real estate market. They include rental (if you already own a property), real estate flipping (buying and reselling), capital appreciation (rise in market price). Depending on your financial situation, you can buy property as the sole owner, or partner up with someone else. Another option is to invest in a company that owns profitable real estate (a real estate investment trust).

Investing in gold 

Speaking of tangible (and safe) investments: gold. It may seem old-fashioned, especially in our current globalized and digitized economy. However, many leading economists argue that the value of gold will only increase in today’s unpredictable market conditions. In case of another recession, some predict the value of gold to rise to $10,000 per ounce.

Unlike currency, gold is not devalued by inflation, and is typically resistant to great market upheavals. And when thinking of investing in gold, you should think in broader terms than just jewelry. You can buy gold in various forms – bars, ingots, coins, etc.

P2P lending

Like real estate, peer-to-peer lending is considered a rather safe investment. Unlike real estate, however, it does not require having a large sum at your disposal. What is P2P? Through a network, or rather, a company, you give loans to your peers. You gain profit by means of interest rates which apply when your peers pay you back.

By lending (investing, actually) to a multitude of peers, you will reduce the risk of a borrower not repaying the loan. That way, if one of them does not make his/her payment, damages are minimized.

Companies that provide such services and network include the likes of Lending Club, Peerform and Prosper. Their websites will make for a good starting point with regard to P2P lending.

Investing in bonds 

If you are about to make your first investment, another way to go would be bonds. A bond represents an investment whereby the investor loans money to an entity (governmental or corporate), for a defined period, at a fixed or variable interest rate. The sum that they loan determines the price of the bond. As for the profit, it stems from the interest that each investor receives as part of the loan. But bear in mind that higher interest rates typically also involve increased risk.

Bottom line

We have singled out some of the investment methods for a beginner aiming to avoid the stock market. As you have seen, in terms of resources needed, risk and profits, they all have their pros and cons. Before you make any decision, it is imperative to have a good look at your assets, needs and projected timeframes. The best scenario would be to save up a sum which you can “forget about” for a certain period and use only for investments.

Investing Your First $1,000 – How to Get Started

You may be tempted to write off rich people’s success, attributing it  to inherited wealth, connections, or sheer dumb luck, but that is simply not true in most cases. Many people who are affluent now started from nothing, and made their money through wise investments.

The good news is that you can do that too, especially with good financial advice. In this guide, we will give some suggestions on how to invest $1,000 wisely, with great returns. However, you should keep in mind the fact that you shouldn’t invest any more money than you are comfortable losing!

Choose Your Investment Vehicle

 

Exchange-traded funds: These funds, abbreviated to ETFs, have become quite popular in recent years, which is a great success, especially considering they were only introduced about 20 years ago. The ETFs can be bought or sold at an exchange during any trading day. ETFs hold a diversified portfolio of assets such as technology stocks, or a representation of the overall stock market.

These funds offer a few benefits. Firstly, they make sure you haven’t put all your money in one basket, since the portfolio managers diversify the investment among many different stocks. Secondly, the management fees are not particularly high, especially compared to actively managed funds. If you plan on trading these funds regularly, you may want to consider one of the day trading brokers.

Mutual funds: Though people usually invest a lot more money into mutual funds, that is not to say that it is impossible to invest $1,000 in them. For most retirement mutual funds, the minimum investment just so happens to be $1,000, so you should be able to do it quite easily. They are easy to set up and manage, especially for a beginning investor.

There are several advantages to mutual funds, depending on your goals. Firstly, mutual funds also expose the investor to a broad swathe of carefully picked stocks, which diversifies your investment automatically. Secondly, if you intend to keep investing after your initial $1,000, then mutual funds are the best option, since the returns are better for larger and regular investments.

Certificates of deposit: These are the safest investments available to most investors, since they are insured by the Federal Government (the Federal Deposit Insurance Corp, to be more specific). Therefore, it is next to impossible to lose money on a CD, since whatever you lose will be reimbursed by the government. However, since there is no risk, the returns are small as well. In fact, the highest yield among CDs is a bit less than one percent annually.

These are great for beginners, since there is no risk, and even the small return you get is better than having your money sit beneath your mattress. Furthermore, many banks do not even charge penalties from withdrawing money early, so you will most likely be able to get at your money quickly if you happen to need it.

However, CDs are not going to make you rich. Most economists suggest taking on some risk, especially for young people. In fact, a commonly cited formula for investing is that you should subtract your age from 100, to find out which percentage of your money should be invested in items with a bit of risk, and the rest should be kept safe. For instance, if you are 25, you should invest 75% of your funds available for investment into items with a bit of risk.

Another good piece of advice is to invest in the stock of well-known companies. These are considered relatively safe investments, since many of these are simply too big to fail. Therefore, you should invest in a company you know well and believe in, so that you can anticipate price fluctuations. For instance, if you are into tech, you might want to consider investing in Google or Facebook, or other notable tech companies.

Finally, if you are investing, why not simply invest with the best? Warren Buffet is considered the greatest living investor, so investing in his company, Berkshire Hathaway, is a relatively safe bet, based on his long history of great investments. In fact, Buffet may even be able to beat the market, which is the goal for all investors, so you can benefit from that too!

Whichever of these options you choose to go with, you have to keep one very important thing in mind. Don’t invest without having done through research into the company and industry you are investing in. A successful investor must do their homework!

 7 Tips for Budgeting Like a Boss

Everyone seems to hate budgeting. People think budgeting is for squares, and that sticking to a predetermined budget will prevent them from having any fun in their lives. However, nothing could be further from the truth.

Budgeting is there precisely to empower you to make the most of the resources you have available. Think of it this way: if you have a plan already made, you won’t have to agonize over whether you can afford to buy something you like – you’ll know it already.

A well-made budget will allow you to keep track of all the things you are liable to pay every month, so that anything left over will be yours to play with. In fact, a conservatively estimated budget will likely be able to surprise you with the amount of money you actually have let over at the end of each month’s bills! Let’s see how this works through some quick and easy tips.

  1. Make a zero-based budget

 At the beginning of each month, make a plan that is going to make use of all the funds you estimate will be available to you for that month. That means that when you subtract all of your expenses from your earnings, you end up with zero, hence the name. All that means is that you shouldn’t leave any unallocated funds in your account, since that means your plan wasn’t comprehensive.

  1. Make a new budget for each month

 You shouldn’t assume that the same basic breakdown of your expenses for the previous month will hold up for the next month as well. There are various factors that go into the expenses for each month, such as the season, holidays, birthdays, etc. For instance, you should expect to pay more for heating in the winter, and more in power bills in the summer if you have an AC. Not ot mention the various gifts you will be liable for month to month with birthdays and holidays! 

  1. Prioritize

Once you sit down to actually make the budget, start with the most important items first. These include the rent, bills, as well as any credit payments you are liable for. Food and clothing are also at the top of the list, as is transportation. If you have debt you need to pay off, make sure to take care of it first! Once these are accounted for, you can move on to other expenses.

  1. Make a schedule

 Once you’ve figured out which bills you have to pay, you should make a monthly routine of paying them, as that will make things easier for you in the long term. It may not be a bad idea to set up an automatic draft to pay the bills at the same time each month. You could also plan to buy groceries in bulk once or twice a month, at a set day.

When you have organized everything so precisely, and have gotten used to it, a lot of the budgeting anxiety will disappear over time, as you become more confident that you can cover all your expenses mont to month.

  1. Create a buffer zone in your budget

 When you are making your monthly budget, always set aside a certain amount of money for any unexpected expenses you may be liable for. If there is an unexpected expense that keeps popping up from month to month, you should definitely bump it up as its own category in your budget. Any funds left over from this buffer zone each month should be left in the same category next month. As your reserve cash increases from month to month, you will feel better protected against these nasty surprises.

  1. Stop using credit cards

 Once you’ve set up a monthly budgeting system, you should simply cut up your credit cards. Credit card debt is among the most onerous debts you can accumulate, due to the high interest rates banks charge, which can accumulate if left unpaid. If you have made a budget that is in line with what you can afford to spend each month, there is no conceivable reason why you would need to fall back on your credit card! 

  1. Relax

 Arguably the most important tip when budgeting is to relax. It will be difficult, especially in the beginning, but after a few months, you will get used to it, and feel like a responsible adult when you find yourself able to meet all your commitments, and still have money left over to have fun!

How to budget without stress

https://www.forbes.com/sites/robertberger/2015/07/26/7-tips-for-effective-and-stress-free-budgeting/#1a82f1102687

 

When asked what their most important personal finance goal is, most people will simply say that they would like to spend less than they make. This is a very good answer, since it allows people to pay off debt, have savings on hand for emergencies, and put money away for a comfortable retirement.

However, saving money can be very difficult to accomplish, especially in these times. There are two main reasons for the inability to save money. Firstly, people may not have enough income to be able to save at all, and secondly, people may be needlessly overspending. Since there is not much we can do to help the first category of people budget better, in this article, we will offer some quick tips for people who fall into the latter category.

  1. Know what the goal is

 People who are averse to budgeting often think that they would have to keep track of every dollar they spend obsessively. While that approach would definitely work, it is not the primary goal of budgeting. The goal is to become aware of what we’re spending money on, and how much each item in our budget will cost us from month to month, so we can plan our expenditures in advance.

  1. Try tracking your spending

 As previously explained, the goal of budgeting is not to account for every dollar you spend. However, doing so for a limited amount of time can give you an insight into the exact way in which you spend money, so that you can plan your future budgets more easily, without having to keep track of everything. This sort of empirical method is sure to give you lots of data on your spending habits, so you should keep at it for about a week or so. If you are particularly zealous, you may try doing it for a month, in order to get a full picture. 

  1. Split your budget into 3 categories

 If you do decide to track your spending for a month, it is more than likely that you will come to the conclusion that you overspend on only a few categories of expenses. People most commonly overspend on eating out, buying clothes, gadgets, and entertainment. With that being said, decide on three of these categories you can forego, in order to bring up the overall health of your budget up.

  1. Use a card

 While most budgeting experts advise cutting up your credit cards in order to save money on the associated interest rates, other types of cards can actually be pretty useful when budgeting. That is because your purchases are recorded electronically, and are therefore easy to access and categorize. To that end, you can use rewards cards, bank debit cards, or prepaid cards, which charge little in terms of fees.

  1. First save, then spend

 Seeing as though the goal of budgeting is to spend less than we make, it is a good idea to save up first before spending. That means that the first item you put in and account for in your monthly budget will be how much you want to save, and then allocate the remainder of your funds according to priority. That way you make sure that you save a set amount of money each month, instead of whatever is left over at the end.

  1. Make use of th 50/20/30 plan

 This plan was popularized by U.S. Senator Elizabeth Warren in her book All Your Worth. Basically, it splits the overall budget into three categories: the first 50% should be spent on necessities, 20% on long term savings, and 30% to lifestyle items. This is great advice for first time budgeters who need a framework to start them off.

  1. Use the tools available to you

There is a whole world of different tools to help you with budgeting nowadays. While it can’t be said that any budgeting app is the best, as they all have their pros and cons, you will certainly be able to find one that suits your style and your needs best. These are useful for several different reasons.

Firstly, they can connect to your bank account and credit cards, in order to keep track of and categorize all of your purchases, which helps you plan ahead. The second major advantage is the fact that there is some external support to help you keep at it when you waver!

Top 10 Budgeting Tips to Get You Through College

http://www.cicmoney101.org/Articles/Paying-For-College-10-Budgeting-Tips.aspx

College students are often tight for cash, squeezed from all sides by tuition fees, textbooks, accomodation, not to mention food and other necessities. That is why it is very important that you are able to budget effectively, if you want to finish college with your finances in good shape. Here are the top ten budgeting tips for college students:

  1. Be realistic

 It may sound obvious that you should be realistic about your monthly income and outgoings, but there is actually a bit more to it than that. You need to make a forecast about how much money you will have coming in, and how much you will need to spend in order to live comfortably. This is more difficult than it seems.

  1. Separate the essential from the non-essential

 There are certain budget items that you ‘need’ and there are other items that you merely ‘want’ but don’t really need. The non-essential items must be relegated to the back of the queue when the allotment of monthly funds is concerned, and that is the only way to make your budget work from month to month.

  1. Guess High for expenses and low for income

 In order to make sure your budget works from month to month, you need to be quite conservative in your estimates. That means accounting for lower income and higher expenses. That way, even if your income is higher and expenses lower, you have money left over. This is a far better scenario than the opposite, overestimating your income and underestimating your expenses, which leads you into debt.

  1. Include a general category in your budget

 It is a very good idea to plan for various unexpected expenses in your budget in advance. The best way to do this is to tally up all of your expenses for the month, and allocate an additional 10% of that sum for various expenses. That way, you are prepared for any emergency that might come your way. If you end up not using this money, simply reserve it, and add to it next month. That way, you will have some extra savings for a rainy day.

  1. Count savings among your expenses each month

 Decide on how much you want to save each month (in addition to the item from the previous paragraph), and then count that sum as an expense in your budget. That way, you are forcing yourself to put money aside each month, which will help you a lot in the long run.

It would also be a good idea to open up a separate savings account and deposit money into it each month. This is a particularly good option if the bank offers you a good deal as far as the interest rate they will pay you is concerned.

  1. Keep your budget in line with your goals and values

 Once you’ve made your budget, and stuck to it for several months, you would do well to check it to see whether your needs and values have changed in the meantime. In that case, it may be necessary to recalculate your expenses, and reallocate funds according to your new priorities. This may seem scary, but it is necessary if you are to stick to a budget from month to month.

  1. Organize your bills

 Don’t wait for your bills and receipts to accumulate to start organizing them. File them away into categories such as housing, utilities, car expenses etc as soon as you pay them. That will make it easier if you need to find them in order to dispute a bill, or apply for a new service.

  1. Rebalance your budget

 Governments do it all the time, so why shouldn’t you? Make sure you stay on top of your expenditures and income, and don’t just blindly stick to your budget once you’ve made it. Make sure you can be flexible with recalculating and rebalancing it as necessary. 

  1. Pay in cash for small expenses

 Contrary to some other budgeting advice, you should pay in cash as often as you can. It is more difficult to calculate your expenses that way, but it is good training, and before long, you will be able to get a feel about how much you are spending without thinking about it too much.

  1. Don’t beat yourself up too much

 No one is perfect, and you should expect to make small transgressions each month. Don’t beat yourself up about it too hard, especially if it hasn’t had any serious impact on your overall finances for that month. Treat yourself.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing your first $1,000

https://money.usnews.com/money/personal-finance/articles/2013/08/15/how-to-invest-your-first-1000

 

You may be tempted to write off rich people’s success, attributing it  to inherited wealth, connections, or sheer dumb luck, but that is simply not true in most cases. Many people who are affluent now started from nothing, and made their money through wise investments.

 

The good news is that you can do that too, especially with good financial advice. In this guide, we will give some suggestions on how to invest $1,000 wisely, with great returns. However, you should keep in mind the fact that you shouldn’t invest any more money than you are comfortable losing!

 

Exchange-traded funds: These funds, abbreviated to ETFs, have become quite popular in recent years, which is a great success, especially considering they were only introduced about 20 years ago. The ETFs can be bought or sold at an exchange during any trading day. ETFs hold a diversified portfolio of assets such as technology stocks, or a representation of the overall stock market.

 

These funds offer a few benefits. Firstly, they make sure you haven’t put all your                   money in one basket, since the portfolio managers diversify the investment among many different stocks. Secondly, the management fees are not particularly high, especially compared to actively managed funds.

 

Mutual funds: Though people usually invest a lot more money into mutual funds, that is not to say that it is impossible to invest $1,000 in them. For most retirement mutual funds, the minimum investment just so happens to be $1,000, so you should be able to do it quite easily. They are easy to set up and manage, especially for a beginning investor.

 

There are several advantages to mutual funds, depending on your goals. Firstly, mutual funds also expose the investor to a broad swathe of carefully picked stocks, which diversifies your investment automatically. Secondly, if you intend to keep investing after your initial $1,000, then mutual funds are the best option, since the returns are better for larger and regular investments.

 

Certificates of deposit: These are the safest investments available to most investors, since they are insured by the Federal Government (the Federal Deposit Insurance Corp, to be more specific). Therefore, it is next to impossible to lose money on a CD, since whatever you lose will be reimbursed by the government. However, since there is no risk, the returns are small as well. In fact, the highest yield among CDs is a bit less than one percent annually.

 

These are great for beginners, since there is no risk, and even the small return you get is better than having your money sit beneath your mattress. Furthermore, many banks do not even charge penalties from withdrawing money early, so you will most likely be able to get at your money quickly if you happen to need it.

 

However, CDs are not going to make you rich. Most economists suggest taking on some risk, especially for young people. In fact, a commonly cited formula for investing is that you should subtract your age from 100, to find out which percentage of your money should be invested in items with a bit of risk, and the rest should be kept safe. For instance, if you are 25, you should invest 75% of your funds available for investment into items with a bit of risk.

Another good piece of advice is to invest in the stock of well-known companies. These are considered relatively safe investments, since many of these are simply too big to fail. Therefore, you should invest in a company you know well and believe in, so that you can anticipate price fluctuations. For instance, if you are into tech, you might want to consider investing in Google or Facebook, or other notable tech companies.

 

Finally, if you are investing, why not simply invest with the best? Warren Buffet is considered the greatest living investor, so investing in his company, Berkshire Hathaway, is a relatively safe bet, based on his long history of great investments. In fact, Buffet may even be able to beat the market, which is the goal for all investors, so you can benefit from that too!

 

Whichever of these options you choose to go with, you have to keep one very important thing in mind. Don’t invest without having done through research into the company and industry you are investing in. A successful investor must do their homework!

 

 

 

 

 

 

 

Personal Finance Advice for Young Adults

You cannot learn how to manage your own money in college or high school – they just don’t include it in the syllabus. However, to help you out, we’re going to give you the most important tips that will allow you to live a successful life.

Self-Control Is Key

 

You might have heard something about this from your parents. However, if you still don’t know how to delay gratification, then it is time to learn it.

Just because you can buy something with your credit card, it doesn’t mean that you should do it. You would be paying interest for things you could have bought – if only you had saved money for it. Paying your credit card bill at the end of the month is vital, and you do not want to ruin your credit score with unnecessary purchases.

Control Your Financial Future

Many people will offer you advice about your own finances. However, you don’t need to listen to them. Sure, they might have the best intentions, like your grandma who really wants you to purchase a house. But, financial advisers can sometimes ruin you, accidentally or on purpose.

Therefore, your best option is to take matters into your own hands. Read some personal finance books, and understand how it all works. You will be ready for all sorts of unexpected events, and your money will work for you – not the other way around.

Track Your Spendings

 

Maybe you need to buy an expensive cup of morning coffee every day. But, have you actually calculated how much you are spending on it each month? If you want to use your money well, then you ought to start budgeting right away. Budgets will keep your monthly spending sprees to a minimum, and you’ll be able to save a ton of money for long-term goals.

Money For a Rainy Day

 

An emergency fund is vital if you want to sleep well at night. Not only will you stay away from financial troubles, but you will also have some extra cash for other life goals.

Treat it as a non-negotiable expense, and save a part of your salary each month. However, do not just keep it under your mattress. Get yourself a high-interest savings account, or any other account where you can keep it out of your reach.

Retirement Goals

You should start making plans for your retirement. No matter what age you currently are, it is crucial to start early. If you have more time to save, then you can amass more money and, one day, leave work forever.

There are convenient retirement plans that are company-sponsored. Usually, they are a fantastic choice because the contribution limits are higher than with an individual retirement plan.

Learn About Taxes

 

Before you even get your first paycheck, make sure you know how to do your taxes. You’ll need to know how to calculate it so that you could see how much money you take home.

However, many online calculators can help you with that – for example, Paycheck City. Try to stay away from bad tax advice and other false information you can find in real life or online.

Take Care Of Your Health

If you do not have health insurance, you might regret it if you ever end up in the emergency room. Even minor injuries can cost you thousands of dollars, which is a lot more than your monthly insurance premium. Therefore, check the rates and research different providers.

In addition, make sure you are taking care of yourself in the meantime. Avoid smoking, and excessive alcohol, and get your daily exercise every day. You’ll certainly appreciate it in the future.

Protect Your Wealth

You do not want to lose your hard-earned money due to your lack of knowledge. Once you start earning your paycheck, make sure that you are taking all the precautions. If you are renting an apartment, get a renter’s insurance. Moreover, if you want to protect yourself in case of an injury or illness, disability-income insurance is the right choice for you.

Furthermore, when you need help with managing your money, do not seek commission-based advisers. Look for those that are fee-only because they will give you unbiased advice.

You could also protect your money from taxes by keeping your savings in a retirement account. In addition, inflation can seriously mess up your finances. Because of that, try to invest in financial securities that will provide you a better life in the future.

Conclusion

 

You don’t need to be an expert to manage your personal finance. You just need these eight tips and the will to learn more about budgeting, savings accounts, and general management.

 

The Difference Between Financial Freedom and Financial Independence

 

Having Financial Independence was a vital milestone in my life. After I attained it, I could have just given my notice and continued with my lifestyle. However, now there is something else on my mind. I want to achieve Financial Freedom as well.

The Basic Facts About Financial Freedom

I’ve realized that some people refer to financial freedom as a synonym for financial independence. However, those two terms are similar to me, yet there is a difference that sets them apart.

For me, financial independence means that I could quit my job now and live off my savings for the rest of my life. It might be a somewhat frugal lifestyle, but I would never run out of money.

It might sound impressive, but maybe you aren’t still convinced whether or not you want to keep your lifestyle the same. After all, interests and desires change over the years. The same thing happened to me as well.

I’ve come to understand that what I knew ten years ago, it doesn’t reflect my wants now. Furthermore, how can I know what my life will be in ten or thirty years?

Because of that, I still pick up my pager every time it wakes me up. I go to work, even though I know that the pager’s days are numbered. Why? It is because I want to achieve financial freedom. As soon as I think about it, everything calms down, and I feel confident. Soon, I’ll be able to retire without any regret. Also, I’ll be able to suffer through unexpected life blows without any trouble at all.

Advantages of having a financial freedom

Unlike Financial Independence, Financial Freedom allows you to change up your lifestyle if you get bored with it. For example, you can, without any regret, spend money on the overpriced internet on the plane. Or, you could always order your favorite thing off the menu. Maybe even hire the babysitter more often.

It also means that I could pay for things that are unexpected or things that I have no control over. For example, my apartment could get flooded. The tax laws may change, and suddenly I have to pay more every year. Therefore, financial freedom is a must, and it will help me get through these events with a smile on my face.

How much money should you have?

 

Let’s say that core expenses for my family are about $70,000. For Financial Independence, that means that I should save that much every year – for 25 years.

It would allow me to maintain my cushy lifestyle perfectly. However, there are the fluff costs – discretionary expenses. So, out of those $70,000, maybe $30,000 are certain treats. By maintaining that number, you’ll get FI.

But, what if you doubled the fluff expenses? It would allow you to spend more money on holidays, restaurants, babysitter, hot tubs. If you double those costs and add the core ones, it would add up to $100,000. In 25 years, that’s $2.5 million – and that’s how much my Financial Freedom is worth.

Stay on the safe side

 

Just because you’ll be saving that much money, it doesn’t mean that you should spend it whenever you want. It is a cushion that allows you to decide whether or not it’s the right moment to spend it.

By having that extra money, you are allowing yourself to say Yes or No to things. But, some of them will always stay a Treat or only for special occasions.

Nonetheless, when I reach my Financial Freedom, I could retire and say Yes to things that feel right – things that are worth the money.

Avoid spending too much

 

If you also strive to achieve Financial Freedom, you have to decide how you’ll use that extra cash. If you just double the discretionary expenses and spend it all, then you will fall into the Financial Independence category.

Baby steps first. Order that dessert, or tip well. Go to events that require you to pay the admission. Have real-world experiences that are worth the money. But, use the rest of it for insurance.

Pay insurance for your family, your home and your cars. That way, your FF will protect you from unforeseen expenses and lifestyle changes.

Sometimes, even maintaining your lifestyle can get expensive. Just look at the health insurance situation. Therefore, it is crucial to ensure yourself against all unpredictable transitions that might happen.

 

The Path Towards Financial Freedom

 

Financial freedom is not just about having money. Rather, it is about being able to run your life according to your needs and wishes. Instead of money being a burden and source of constant concern, the goal is to put yourself in a position in which you call the shots. That way, when unexpected events take place (and they will), you will be able to land on your feet and keep moving ahead.

Define financial freedom

 

Financial Freedom

Achieving financial freedom is a matter of goals set. But before that you have to take a good look at your circumstances and define what would help you feel financially independent. In a specific case, freedom might entail factors ranging from career choices, retirement timing, all the way to being able to afford items that will make you happy. It can also mean helping others in need.

Here are some of the steps that you can take on the path towards your financial independence:

Monthly budget

If you are aiming for financial freedom, planning is crucial. Put yourself in a position where you will plan and account for every penny that you and your family spend each month. Be rigorous and, no matter how wealthy you become in the process, keep maintaining a strict budget that you adhere to. Do not despair if your plan needs adjusting as you go along. That is normal and will only lead to long-term control.

Next goal: debt-free

 You cannot begin to accumulate wealth (and control) before clearing your debt.

After you start budgeting, you should notice an increase in your funds. Use this to save up a sum to keep aside for unexpected events. Once there, you start eliminating your debt. It is an uphill battle, and there are no quick solutions. However, few things can compare with the feeling of actually becoming debt-free. Finally, your income will indeed be yours. That should be your main motivation.

Choosing your career

 

Your career – and the income stemming from it – is your main asset. Still, when making choices, there are other factors to consider apart from the size of your salary. You do not want to be doing a job that doesn’t fulfill you, no matter how good it pays. The trick is to keep a good balance between those factors. Other important factors to keep in mind: long-term career plans, growth possibilities, and retirement options. Remember that the choices you make here will have a major influence on the way in which you handle your finances, in years to come.

Savings

 

Once you manage to get rid of debt, the next step should be to start building a savings fund to cover a) short-term emergencies b) large purchases or expenses such as vacations. That way, you’ll get more flexibility and options in your overall financial planning. And, more importantly, a foundation upon which you can take the next step.

Investment possibilities

 

With the previous step completed, you are ready to seek a financial advisor and consider your investment options in the long run. Begin by planning your retirement savings, aiming to find a tax-favorable solution to invest up to 15% of your income. Be sure to make use of any form of tax relief in the process, such as the Roth IRA retirement plan, for instance. Speaking of long-term, your next step could be to invest in an Education Savings Account. ESA also implies that, once paying for your kid’s college, these expenses will be tax-free.

Another form of investment is to pay off your mortgage, thus become the real estate’s owner. That way, your home will not be a burden, but rather, a part of your financial independence.

After that, and after you’ve used every benefit of tax-favored accounts, you can think of moving into taxable investments. Having a financial advisor pays off here, as you will be able to rely on quality pointers regarding the choice of mutual funds to invest in. Also, when choosing your advisor, you will need a reliable expert who will help you minimize risk, keep an overview of options ready for you, and keep an eye on the long-term goal: financial freedom.

Getting to the finish line

As you will come to realize, financial freedom means much more than simply being able to cover any expense. When you get to that point, you will be able to think beyond limitations and help others in need, too.

The path towards independence is by no means an easy one. But it is very worth taking!