Figuring out how to Master Your Finances can be extremely difficult, especially if no one taught you the necessary personal finance concepts to do so.
Thankfully, it’s easier than ever to learn about how to make smart money decisions.
Here are 8 major financial concepts that I believe will set you up for major success with your finances both now and in the future.
An Emergency Fund Could Save Your Life
One of the first steps anyone should take when taking their finances seriously is building an emergency fund.
Most experts suggest emergency funds so you can avoid going into debt for unexpected expenses or temporary drops in income. While these are great reasons to have an emergency fund, there is one that’s even more important.
Believe it or not, an emergency fund can literally save your life. We found this out when we used part of our emergency fund to evacuate from our hometown when Hurricane Michael, a category 4 hurricane, hit our town.
Sadly, at least 43 people passed away because of the hurricane. If they had emergency funds, they might have been able to escape.
Track Your Spending
Tracking your spending is one of many keys to financial success. If you don’t know where your money is going, there’s no way to know if you’re making progress.
You can track your spending in many ways, but my favorite is using automated software like Personal Capital. Once you link your accounts, transactions are automatically pulled into the software.
All you have to do is double check that everything was pulled in correctly. If it isn’t, fix the errors.
However, if it is, you have records of how much you spent so you can work on improving your spending to match your values and goals.
Here’s how you can get started tracking both your income and your expenses.
Related: Is Personal Capital Safe?
Pay Yourself First
Once you have an idea of how much you spend each month, you can start focusing on paying yourself first. To do this, simply make saving the first thing you do after you get paid.
Setting aside money immediately after you get paid makes sure you put saving as the number one financial priority in your life. No longer will you only save whatever is left over at the end of the month.
Figuring out how to start the process of paying yourself may be daunting, but it doesn’t have to be. In fact, it’s pretty simple.
Learn why paying yourself first is so important, how to do it and how it sets you up for financial success. It can even make you rich.
Small Purchases Can Bleed You Dry
Making a $5 purchase here or there isn’t a big deal, right? Wrong. While a single $5 purchase probably isn’t a big deal, the problem comes when you don’t realize how many small purchases you’re making.
When you make 10, 20 or 50 purchases of $5 or less in a month, they really start to add up. If you instead invested that $50, $100 or $250 per month or used it toward your other financial goals, you could start making real progress fast.
Don’t know how to tell where your money leaks are? Read about how to find these money sinkholes and what to do about them here.
Big Changes Offer Major Results
While small changes can add up to big money, there is no replacement for making huge money moves. Huge money moves allow you to save significant amounts of money by making just one or two smarter money decisions.
These decisions don’t pop up every month or even every year, but when they do pop up you must be ready to face them head-on.
Getting a great deal on your next car and driving it until the wheels figuratively fall off is one example of a major money change. Another is selling your oversized and overpriced house to move to a more modest home that still meets your needs.
These decisions may not be fun, but if you enjoy living life more than you enjoy having a fancy car or a McMansion, they’ll be worth it.
Quit Taking Out Car Loans
Having a car loan is a simple fact of life, right? Nope! While this is what car manufacturers, dealerships and salespeople would love for you to believe, it simply isn’t true.
Buying a car without a car loan may seem impossible if you don’t have any savings. Thankfully, just one simple change could lead to paying for your next car in cash.
Wouldn’t it be awesome to avoid paying a car loan lender $300 or more every single month for the rest of your life? You can make it a reality.
Investing Doesn’t Have To Be Hard
So many people make investing seem like it’s super difficult and super risky.
While there definitely is risk involved, you can mitigate some of that risk by diversifying your investments and investing for the long-term.
It’s super important to invest if you want to build wealth, but figuring out how or where to invest can be difficult. Check out this post that discusses where to save or invest and how I personally prioritize.
If you’re still scared about investing, here are a few mindblowing facts about investing that should ease your mind.
Finally, it’s important to remember that you aren’t going to get rich overnight by investing. It takes patience and time. Personally, I believe investing shouldn’t be exciting because if it is you’re doing it wrong.
Actually Pay Your Mortgage Off
If you own a home or have owned several homes, you know it seems like it is impossible to pay off your mortgage.
Most people take out a new 30 year loan every time they buy a new home. This resets the clock on paying off your mortgage each time.
Rather than resigning to the fact you’ll have a mortgage payment for the rest of your life, you can make a couple changes so you can pay your mortgage off before you retire.
If you follow this one simple rule you might own a home without a mortgage payment before you retire.
Get Started Today
The key to making financial progress is getting started. While reading about these earth-shattering concepts is a good start, your finances won’t start improving unless you start taking action on what you’ve learned.
- Pick one or two of the concepts above and start enacting them today.
- Open a Personal Capital account and start tracking your spending.
- Set up an automatic bank transfer to pay yourself first on payday.
- Examine your spending to look for money sinkholes and big opportunities to save.
Just get started. You’ll be glad you did.
Which one of the above concepts is your favorite? Which one could improve your finances the most? Did we forget anything we should include? I’d love to hear your thoughts.