In this weeks blog post we wanted to give you quick look at things that we have done, personally, to organize our finances and make sure we are set for the future.
Many of us look at our advisors and say “Wow, he/she is very successful, they must be very good at what they do!”. But what exactly have your advisors done to shore up their own financial situations to get ahead and stay ahead?
Keep The Starving Student Mentality to Get a Jump on Saving
Many of us understand how tight finances can be putting ourselves through post secondary education. The cost of tuition, living, and having minimal income from a part-time or summer job, made for a meager lifestyle.
Coming out of University, we each committed to continuing to live on a “student budget”. The absence of tuition was typically filled with other costs, but we tried to keep costs and expenditures as low as possible.
This could also be referred to as avoiding life-style creep. Life-style creep is when your cash outflows increase proportionally to your increase in cash inflows. (buying a newer car, new clothes, excessive vacationing, etc). This is a huge killer for building wealth at any age.
To avoid this we tried to live the same way we did when we were in school. We didn’t upgrade vehicles when we landed our new jobs. Rather than paying full price for everything, we clipped coupons and looked for sale items. Furthermore, we looked for cheap entertainment alternative with friends who shared the same mindset. In the end, avoiding unnecessary costs and trying to save as much as possible got us ahead.
To help us do this and stay on top of our finances we implemented…
Budgeting is probably one of the most referenced pieces of advice on our blog. However, it cannot be overstated and it is extremely easy to implement.
Coming out of school we each knew our cash inflows and we knew our rough expenses. We drafted a budget and tracked every dollar of income and expense. As we aged our budgets changed but the premise remained the same; live well below your means.
Tracking your expenses is extremely easy with today’s technology. If you don’t want to do it manually on excel, there are apps that will do it for you. Check out the budgeting app ‘Mint‘.
If you prefer to do it manually but don’t want to build an excel spreadsheet, don’t worry we’ve got you covered! Just use our contact form and let us know that you’d like a copy of it.
Tracking what was happening to our finances allowed us to…
Save Before you Play
Most of the time we knew roughly how much money it would take to get us through the month, and what would be left at the end (barring any unforeseen expenses).
To ensure that we stayed within the boundaries of our budgets, we would move money into our savings account at the beginning of each month.
Doing this ensured that we would have enough money for the future and for any unforeseen expenses. It was also a way to guarantee that we wouldn’t overspend.
The earlier you can start saving the better. If you are able to put money away at 30 great, at 25 even better, at 20 fantastic! The earlier you start saving the more time compounding interest has to work. Saving right after we graduated helped us establish an emergency fund and relieve a lot of potential financial concern.
If you haven’t started saving yet, the good news is it is never to late. If you need help with where to start, reach-out to us. We would love to get to know you and your situation better.
Build a Good Credit Score
Even though you may not need a good credit score at your current stage in life, it is almost a guarantee that you will at some point. It might be used to buy a car, get approved for a line of credit, and certainly when you apply for a mortgage.
Building a good credit score is easy… but it takes time. It’s similar to building up merits on your drivers license. These things both take a long time to build, and one mistake can ruin all your hard work.
For more information on credit scores, read our previous article “Your Credit Score Matters“.
Having a good credit score can end up saving you a lot of money in interest cost throughout your lifetime.
Have Adequate Insurance Coverage
For your premium paid, insurance offers temporary access to capital to replace what was lost to an unforeseen circumstance.
Types of insurance that are very important and need to be reviewed with an advisor are: car insurance, travel insurance, health and medical insurance, life insurance, house insurance, third party liability insurance, etc.
Having adequate insurance coverage, especially while you’re young and growing your career is a point we can’t stress enough! Many people young and old are catastrophically under insured and one unforeseen accident, sickness, death, or other circumstance could set back your finances significantly, or worse, bankruptcy.
These are some of the things we did to “get a leg up” and things we continue to do. The earlier you start, the better. However, it’s never to late. It all begins with just one step in the right direction.
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Disclaimer: This Forbes Wealth Blog is for informational purposes only and does not constitute financial, legal, or tax advice of any kind. Please consult your legal, accounting, tax, investment, banking, and life insurance professionals to get precise advice relating to your particular situation before acting upon any strategy