Remember back when you’d hear your parents’ hypercautious tones murmuring in your head every time you made a major purchase? As you got older, those nagging voices turned into a guilty “I should probably …” disclaimer whenever it came time to pay the bills.
Today, you’re finally following all those smart financial strategies you couldn’t help but absorb over the years — and you’re probably asking yourself why it all took this long to sink in.
Many of us are still coming to terms with financial truths we’ve been taught all our lives but that took years to gel in our checkbooks. If you could go back in time, what financial lessons would you urge your younger self to heed?
1. Save before you spend. Savings accounts, piggy banks, store layaway … Saving may be old-fashioned, but it works. Nothing kills the buzz of a coveted new car or designer purse faster than the sting of monthly payments that stretch your budget too tightly for comfort. Lesson learned: The pleasure gained from lifestyle items like cars rarely lasts as long as the debt does.
2. Start saving sooner and in smaller increments. It’s hard to get motivated to save when your contributions seem so small that they hardly seem capable of making a difference. But trying to pile on larger chunks, especially if you’re playing financial catch-up, puts a hurting on your wallet. Remember this: Slow and steady wins the race. Get in the habit of paying yourself first right from the start, and watch your nest egg grow over the years. As your income increases, then increase the amount you put away in savings. The younger you are when you start saving, the more time is on your side.
3. Establish an emergency fund. You’ll feel a lot safer with enough cash to cover three to six months’ living expenses stashed away. Then use your emergency fund, not a credit card, when you’re pinched by appliance repairs or car troubles. Be firm with yourself about what circumstances constitute an emergency; if you find yourself dipping into your emergency fund every summer for vacation, it’s time to go back to lesson #1 and save before you spend.
4. Budget. Above all, be honest with yourself about your finances. Budgets aren’t just for people who are strapped for cash; they’re a mark of financial maturity and self-awareness. Track your spending. Know how much money is coming in, and know where it’s going out. With that knowledge in hand, your other financial goals will practically write themselves.
If you have to borrow money for a transaction, make sure you aren’t paying more interest than you must. Taking the time to research the best rates can save you a bundle on mortgages, auto loans, and credit cards. The time you spend doing homework can save you a lot in the future!