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6 Money Mindsets For A Healthy Financial Future

6 Money Mindsets For A Healthy Financial Future

Your mindset towards money can greatly impact whether you succeed or fail financially. What role do you see money playing in your life over the next few years? How will you balance investing, spending, and saving? The answers to important questions like these greatly depend on your mindset. In this article, you will find some tips that may help you refine your views on money and its role in your life. Below are 6 money mindsets that you can adopt in order to set yourself up for financial success.

1. Money Is A Tool, Not A Goal

Think of money as the vehicle that will take you to your financial destination. It can be tough to consistently save and sacrifice simply to have more money in the bank. But, when you formulate clear goals for your life, it will be easier to see how your savings can propel you toward those goals.

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What could you do with a couple more zeros in your bank account? You could be better prepared for an emergency or job loss. You could take that vacation you have been dreaming about. You could help a person in need without a second thought.

2. Experiences Trump Things

As you accumulate savings, increase your income, and decrease debt, you will find yourself with more and more disposable income to use any way you please. While it is okay to purchase a few “toys” every now and then, remember that experiences will ultimately bring you more pleasure than things.

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Use money to create memories and strengthen relationships with friends and loved ones. This will lead to a more satisfying financial future than simply gathering more possessions. Travel to a new country. Learn a different skill. Pick up a new instrument.

3. Think Long Term And Big Picture

What you do with your money today will have a huge impact on your life 5, 10, or even 50 years from now. What kind of life do you want to provide for your family? Do you think you will be interested in pursuing an advanced degree in the future? Is being debt-free important to you? How do you want to support yourself in your retirement years?

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Sometimes, we get so bogged down with the day-to-day financial transactions that it is hard to think about the financial future. Still, it is important to periodically check to make sure you are heading toward your long-term goals in addition to keeping the bills paid right now.

4. Investing Is For Everyone

Today, technology has made it possible for anyone to become an investor and put their money to work. Even if you are a beginner, there are plenty of resources available online to teach you the basics of investing. The key to successful investing is starting early. The earlier you begin, the more compounding interest will work in your favor. As you create your financial plan, be sure to consider how you can make money on your investments in addition to your salary.

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5. Money Must Be Actively Managed

Although there are many automated tools available to help us save, invest, and pay bills, you still want to take a hands-on approach to managing your money. You cannot “set it and forget it.” Check all your accounts regularly to make sure everything is working as planned. Did the utility bill go up a little this month? Are your automatic bill payments still being processed properly? Is there room in the budget to add a little more money to the savings account?

6. Money Ultimately Comes From Value Creation

Throughout your financial life, make sure you equate money and income with value creation. In order to earn more money, you need to constantly be searching for more ways to create value in the world. You can do this by taking on new responsibilities at work, finding a job that is more valued by the employer, or by starting a business that provides exceptional value to customers. Other ways you can create value include obtaining specialized certifications in your field, cross-training in different disciplines, and teaching and mentoring others. Each of these will not necessarily pay off in the short term, but over time these behaviors will certainly attract great opportunities to you.

Featured photo credit: Olu Eletu via unsplash.com

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Last Updated on June 6, 2019

The Average Retirement Savings and How to Save Wisely

The Average Retirement Savings and How to Save Wisely

Are you on track for retirement?

If not, don’t worry, I’m not sure either. I save each month and hope for the best.

Fortunately, I’m at an age where most people don’t save so I’m ahead of the curve.

But, what if you aren’t in your 20s? What if you’re near retirement and are looking to gauge where you stand?

If so, keep reading. Here’s how to prepare for retirement and save wisely during the process.

What Does the Average American Have Saved for Retirement?

Saving for retirement is tricky.

Tell someone straight out of college to save $10k a year for retirement and it’ll be next to impossible.

Make the same request to someone decades older and they’d be more likely to be able to save this amount. But, a 20-year old college student can be “financially ahead” of someone saving more than them. Why?

Age matters in your financial journey. The younger you are, the more time you have to save and put compound interest to work. As you get older and have more saving power, you’d have less time to put compound interest to work.

Here are the average savings Americans hold by age bracket:

20’s – $16,000

During this stage, most people are paying loans and moving up the corporate ladder. Your best bet during this stage is to focus on eliminating debt and increasing your income. Don’t focus only on getting a high-paying job neither.

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Instead, focus on learning via Podcasts, reading books, and taking specialized courses. Doing this will make you more valuable and give you more career options.

30’s – $45,000

At this stage, you’ve hopefully escaped your entry-level salary and work at a career you enjoy. Your earning power has increased but you now have more obligations. For example, marriage, kids, and a mortgage.

Set a plan to pay off all your debt and focus on eliminating unnecessary expenses. Leverage financial tools like Personal Capital to ensure you’re on track for retirement.

40’s – $63,000

This is the stage where you’re at the prime of your career. Top financial institutions recommend you have at least 2 to 4 times your salary saved up. If you’re falling behind, start maxing out your 401K and Roth IRA accounts.

50’s – $115,000

During your fifties, you’re close to retirement but still, have time to save. You may be helping your kids pay college tuition and other expenses. Since you’re at the peak of your earning power, max out all your retirement accounts.

60’s – $172,000

By this point, you should have about eight times your salary saved up. If not, you’ll depend primarily on social security benefits averaging $1400 per month. Max out all your retirement options as much as possible before retiring.

Ways to Save Money on a Tight Budget

The sad reality is that most Americans aren’t saving enough for retirement.

Even high-earning power isn’t enough to secure one’s financial future. You need to have the discipline to save for retirement while time is in your favor. Don’t wait for you to have a high salary to save, start with having a small budget.

First, get a clear picture of where you stand. Write down a list of “needs” and “wants.” For example, Netflix and Amazon Prime are “wants” and a “cell-phone” is a need.

Use tools like Personal Capital to analyze your spending patterns. Personal Capital allows you to add all your financial data in one place–making it a powerful option to gauge where you stand.

Once you know all your expenses, organize them from highest to lowest expense. When you can’t cut more expenses, call your service providers to negotiate a lower price. If you’re not good at negotiating, use services like Trimm to lower your monthly expenses.

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How to Save Money Each Month

By this point, you know the average amount of money you should have saved for retirement based on your age.

But, breaking this down into monthly goals can be challenging. Here are some rule of thumbs to follow:

Aim to contribute 10%–15% of your salary each paycheck. Review your progress each week.

Why so often? The reality is that life gets in our way and you will have many financial setbacks. Your goal isn’t to be perfect but to get back on track instead.

Reviewing your finances weekly lets you know where you stand with your retirement. This doesn’t have to be a long process either. All it takes is login in Personal Capital to view your net worth and check how much you have saved for retirement.

Turn saving into a game and aim to save more each month. It will get challenging but you’ll get creative and find more ways to save.

Top Money Saving Challenge Tips

To prepare for your financial future and not be another statistic you need to be different.

How?

By adopting new habits that’ll help you become a saving machine. Here are some ways you can save more:

Automatically Contribute Towards Retirement

If you’re working for a company, you can automatically contribute towards your 401k. If you’re not currently contributing more than 10%, make this your goal. Contribute 1% more today and automatically increase this amount a year from now.

Odds are that you’re not going to be negatively affected by contributing 1% more. Many times we spend our money on things we don’t need. Contributing more towards retirement is a great way to secure your financial future.

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Use the Right Tools to Know Where You Stand

Once you’re contributing more towards your retirement accounts, gauge your progress. Make use of finance tracking apps to help you view the big picture of your retirement.

When I’d first signed up for the app Personal Capital, I didn’t know I had a negative net worth. Despite saving thousands of dollars, my debt brought my net worth to the negative. Knowing this motivated me to save more and spend less.

Now, I have a positive net worth. But, it was because I was able to view the big picture using the app. Find out what your net worth is using a finance tracking app and you may surprise yourself.

Bring in Experts to View Your Blind Spots

If you have too little or too much money saved, you should consider hiring financial experts.

Why?

You may need someone to hold you accountable to help you reach your financial goals. Or, you may need help managing your money as effective as possible.

Regardless of the reason, getting help may help improve your financial situation.

Before you hire an expert, find out which areas you need help the most. For example, if you’re constantly overspending, find a debt counselor. If you’re struggling with choosing the best investment options, hire a financial advisor.

Speed up Your Retirement Contribution

After learning how to manage your money well, the next best thing is to earn a higher income.

You’re capped at how much you can save but not much you can earn. Even if your employer isn’t giving you a promotion, you can still take charge of your financial future. How?

By starting a side-business.

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This will be something you’d work on after you’ve finished your day job. Once you start earning income from your side-business, you’ll be financially better off.

The best part is the more work you put into your side-business,[1] the more potential it has to earn more money.

So start a side-business in an area you’re familiar with. For example, if you enjoy writing, do freelance writing for small e-commerce businesses.

Once you’re earning a higher income, you can contribute more towards your retirement. Don’t wait for the right opportunity to secure your financial future, create one.

Reach Financial Freedom with Confidence

What if you were able to retire tomorrow with no problem, all because you’d have enough money saved up and little to no debt left to pay off? How would you feel?

My guess is that you’d feel happy and relieved.

Most Americans are falling behind their retirement goals for many reasons. They’re not prepared, they carry bad money-habits and are thinking short-term.

For you to retire successfully, you need to work backward and adopt better habits. Contribute more towards your 401K and focus on growing your income.

If you do, you’ll save money and pay debt faster.

Don’t beat yourself up if you’re behind your retirement goals. Take the first step today towards a brighter financial future. Isn’t retirement worth the hard work and sacrifice to be at peace?

Featured photo credit: Huy Phan via unsplash.com

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