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7 Simple Steps to Improve Your Financial Management Skills

7 Simple Steps to Improve Your Financial Management Skills

Have you ever wondered why our educational system doesn’t teach life skills? I have. I teach communication at the university level, but by the time the students get into my class, their habits are pretty much already formed—and many of them are bad ones.

For example, maybe they saw their parents yell and scream at each other. Or maybe they avoided conflict altogether. These are not good skills to adopt. It’s really sad that they didn’t learn better life skills while they were in school.

Another life skill we weren’t taught in school is how to handle money. Once again, we learn from how our parents handled money. Were they spenders? Were they savers? Did they teach you invest? Did they teach you about the stock market or how to save for retirement? I’m betting the answer is “no” for most of us.

Just because you didn’t learn good financial skills in school doesn’t mean that you can’t learn them now. Here are some tips you can follow to get better at managing money.

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1. Make a budget—and stick to it.

Do you know where all your money goes? Do you know how much money you spend on things like going out to eat, seeing a movie, buying beer, or purchasing clothes? Most people don’t. Are you one of those people who just prays every day that you don’t overdraw your bank account? If so, make your budget. Go back through your checkbook or bank statements for the last year and write down how much you spent in each category. You will probably be surprised at how much of your money is “wasted” on things you weren’t even aware of.

2. Be a conscious consumer.

When you go to the grocery store, do you have a list? Do you look at prices? Do you use coupons? There are many online resources and apps that can help you be more focused on what you are actually spending.

Don’t “sleep walk” through life. Be aware of every single cent you spend! When people don’t do that, their money tends to just evaporate. It takes a bit of effort to look for coupons, make lists, examine the prices at the stores where you shop, but it’s worth it in the long run. And, it makes a BIG difference.

3. Balance your checkbook.

I record everything I purchase. In fact, sometimes my friends make fun of me because I’m always whipping out my checkbook to record everything I spend whether it’s at Target, the gas station, the bowling alley, or pretty much anything else.

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These days, most people just rely on looking at their bank balance online. But if you only do that, then it allows you to not care what you are spending in the moment. But if you hold yourself accountable by recording everything, then you will not over-spend or overdraw your account.

4. Have a plan and a vision.

In order to accomplish anything, you have to have a plan, right? I mean, if you wanted to go to San Francisco but you didn’t have Mapquest or a GPS to calculate your route, you would never get there! Instead, you would just drive aimlessly into nowhere.

That metaphor is pretty much what happens to you when you don’t have a financial plan. You often ask yourself, “Where did that money go?” But if you have a plan and a budget (see #1), then you will know exactly where your money has gone.

5. Think like an investor.

As I said in the introduction, our educational system does not teach us anything about how to handle money—especially when it comes to how to grow it. But think about it. Did the wealthiest people in the world just save $500 a month and leave it at that? Of course not! They learned how to turn that $500 a month into $1,000. Then $10,000. Then $100,000. And so on. You get the point.

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You can’t expect to have a solid financial future if you’re not thinking about how to grow your money. So if you start to think like an investor, you’ll see your nest egg expand.

6. Work together with your partner/spouse on the same financial goals.

If you’re married or in a partnership where you share money, then you need to work together. Since I teach about relationships, I know that one of the biggest conflicts in relationships is money! Frequently, one person will be a saver, and the other will be a spender. This doesn’t work! So it’s important that both you and your partner get on the same page about your financial goals.

Sit down together and make your budget. Meet with a financial adviser so you can learn how to invest your money wisely. But if nothing else, you need to make sure that the two of you have the same goal and vision. And that you actually stick to it!

7. Commit to saving money.

Speaking of sticking to something, commitment is everything. You can’t do anything half-way. You can’t “sometimes” do something and “sometimes not.” You have to be consistent! You have to stay the course!

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It’s kind of like losing weight. If you only occasionally eat less and exercise more, you MIGHT lose some weight. But chances are, you’ll probably just go back to your old habits. So that’s why you need to commit to saving money and building your future. Otherwise, you might as well not even bother!

If our schools taught us these financial skills, then what I have talked about in this article might come naturally to us all. But for most of us, it doesn’t. But it’s not rocket science. It’s just like anything—if you want it badly enough, you will do it! If you want to make your financial situation better you can do it! But you just need to start with the decision to do so.

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Carol Morgan

Dr. Carol Morgan is the owner of HerSideHisSide.com, a communication professor, dating & relationship coach, TV personality, speaker, and author.

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Published on May 7, 2019

How to Invest for Retirement (The Smart and Stress-Free Way)

How to Invest for Retirement (The Smart and Stress-Free Way)

When it comes to stocks, I bet you feel like you have no idea what you’re doing.

Everyone who’s not a financial expert has been there. I’ve been there. But, time is passing and you need to be crystal clear with how you’re investing for your retirement.

Otherwise, it’s back to work until you can afford not to. So, how can you invest for retirement when you’re not a financial expert?

You take the time to learn the fundamentals well. If you do, you can grow your wealth and retire happy. The best part is that you don’t need to be a financial expert to make smart investment decisions.

Here’s how to invest for retirement the smart and stress-free way:

1. Know Clearly Why You Invest

Odds are you already know why should invest for retirement.

But, maybe you know the wrong reasons. It’s time you get clear on why you’d like to retire. Here are some questions to help you get started:

  • Will you spend more time with your family?
  • What does retirement mean to you?
  • Are you looking to launch that business you’ve been holding off for years?

Everyone wants to retire but not for the same reasons. Once you’re clear for why retirement is important for you, you’ll focus on making it happen.

Investing in the stock market allows you to take advantage of compound interest.[1] All this means is that your money earns money on top of its interest. A reason why investment in the stock market is one of the best ways to plan for retirement.

2. Figure out When to Invest

“The best time to plant a tree was 20 years ago. The second best time is now.”– Chinese Proverb

It’s true if you’d had started investing when you were 10 years old, you’d have a lot more money than you do today.

The reality is that most people don’t start investing until it’s too late. So, if you’re currently waiting for the perfect time to start an investment, it would be today. Open your calendar and block out 2 to 3 hours to choose how you’ll invest for retirement.

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A quick way to get a snapshot of where you stand is to use Personal Capital. Input all your personal information and spend some time setting your retirement goals. Once completed, you’ll know where you stand with your retirement.

Having a savings account for retirement isn’t planning for retirement. Why? Your money loses value when you factor in US inflation.[2]

3. Evaluate Your Risk Tolerance to Create the Perfect Portfolio

Investing your money well depends on your emotions.

Why?

Because when the market drops most people panic and withdraw their money. On average, the US stock market yields an annual 6% to 7% ROI (return on your investment.) But, this won’t happen if you’re worried about short-term loses.

Before you invest your next dollar, know your risk tolerance.[3] Your risk tolerance determines the number of risky and safe investments you’d have.

Regardless of your investing style, you need to view investing for retirement as a long term game. Know that some years you’ll lose money but recoup this in the long-term.

Avoid watching market-related new. Also, create a double authentication to log in your investment account. This way you’re less likely to withdraw your money.

4. Open a Reliable Retirement Account

Depending on your circumstance, you may need to open a new brokerage account. This is the account is where you’ll invest your money.

If you’re currently working for a company, odds are that they offer a 410K investing account. If so, here’s where you’ll invest most of your money. The only problem with this is that you’re limited to the stock options that are available.

You do have the option to open a separate IRA (individual retirement account.) Here are some of the best brokers:

  1. Vanguard
  2. TD Ameritrade
  3. Charles Schwab

5. Challenge Yourself to Invest Consistently

Committing to invest for retirement is hard, but continuing to do so is harder.

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Once you’ve started investment for your retirement, you run at risk from stopping. Often you’ll want to contribute less, so you’d have more money in your pocket.

That’s why it’s important that you create a budget that allows you to invest each month. If you’re working for a company, you can set a percentage for the amount you’d like to contribute each month. Most people by default contribute 1% but aim to contribute 10% to 15%.

Be the judge for how much you can afford to contribute after covering important expenses. To stay motivated, use Personal Capital to view your net worth.

A benefit to contributing money to your retirement account is not taxed. For example, if you earn $100 and invest 10%, you’d contribute $10, then get taxed on the remaining $90. As of 2019, the most you’re able to contribute towards your 401K is 19K but this can change.

6. Consider Where to Invest Your Money

The most common way to invest your money is in stocks, but it’s not the only way. Here are other ways to invest:

Robo Advisors

Robo-advisors[4] are fancy algorithms that’ll choose the best investments for you. Sites like Wealthfront make it easy for first-time investors to invest their money. You’d input information about yourself and set your risk tolerance.

Then, set your monthly contribution amount and your robo-advisor would do the rest. Robo-advisors charge a fee to manage your money, but less than regular advisors.

Bonds

Think of bonds as “IOUs” to whomever you buy them from.

Essentially, you’re lending money and charging interest. Like stocks, not all bonds are equal. Some will be riskier than others depending on their rating.

Here are the different types of bond categories:[5]

  1. Treasury bonds
  2. Government bonds
  3. Corporate bonds
  4. Foreign bonds
  5. Mortgage-backed bonds
  6. Municipal bonds

Mutual Funds

Picture a group of people dumping all their money in a jar that’s managed by a professional. This is how mutual funds work. The fund manager manages the money looking to earn capital gains (interest.)

One of the best types of mutual funds is index funds. Since these funds don’t try to beat the market and instead follow it, they need less research. Because of this they often charge the lowest fees and yield the best long-term results.

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Real Estate

Yes, buying a home is an investment when done correctly.

Imagine buying a home and using it as a rental property. After repairing it, you receive a monthly surplus check of $100 to $200.

This may not sound like a lot, but repeat this process enough times and you’d earn a large amount of passive income. That’s why real estate is one of the best investments to not only retire but become wealthy.

But, it requires a lot of money to start and you should expect losing money along the way as you learn the process.

Savings Accounts

Your money can still grow in a savings account. Nowadays most online banks offer a 2% annual return. Although the average inflation is higher your money will be available when you need it.

7. Master Disincline to Dodge Short Success

Investing for retirement is a long-term strategy. That’s why you need to master delayed gratification. All this means is delaying short-term pleasure for something bigger in the future. Research shows that those who have delayed gratification are more successful.[6]

So how can you master delayed gratification?

By building your discipline.

Think back to what retirement means to you. A clear purpose will help you avoid withdrawing your money during a market downturn. It’ll help you contribute more towards retirement when you’d want to waste it instead.

Your journey towards retirement will be long, so reward yourself along the way. Choose a reward that’s relevant and meaningful, so that you reinforce positive behavior. For example, after contributing more towards retirement, treat yourself to dinner.

8. Aggressively Invest on This One Investment

I’ve mentioned several types of investments but haven’t covered the most important one.

It sounds cliche but here’s why you’re your best investment towards retirement. The more you know, the more money you’ll be able to make. The more good habits you adopt, the more secure your retirement will be.

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More importantly, investing in yourself is an investment that no one can take away. There’s no market downturn nor tragic circumstance that’ll wipe your knowledge and experience.

But, how can you invest yourself?

Reading books, blogs, and anything that’ll help you learn new topics daily. Listen to podcasts and audiobooks on your commute to/from work.

Save money to buy courses and hire coaches. I used to believe hiring coaches was a waste of money when I could learn the subject alone.

But, coaches see your blind spots and hold you accountable. Hiring the right coach will help you achieve your goals faster than you would’ve alone.

Retire Happy with Excess Money

The key to a secure financial future doesn’t only belong to financial experts.

It’s possible for you and I. What if you were able to retire earlier than most people and weren’t a financial planner? What if you were able to focus on what you enjoy doing the most while your money was working hard for you?

I know this sounds impossible now, but the truth is you’re capable of taking charge of your retirement. I’m not a financial expert but I’ve learned how to invest my money by reading books and learning from others.

Investing your money is scary. So start small and invest a small amount of your money with a robo-advisor. Feel your money drop and rise for a month or two. Then, invest more and keep this up until you’re aggressively saving for retirement.

One day, you’ll wake up with a net worth you’re proud of – confident about your retirement. You now know a few strategies you can use to invest in your retirement. Will you take action to retire happy?

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Featured photo credit: Matthew Bennett via unsplash.com

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