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Dear 20-Somethings, If You Don’t Know These 7 Important Things About Money and Finance, You’ll Regret It in 10 Years

Dear 20-Somethings, If You Don’t Know These 7 Important Things About Money and Finance, You’ll Regret It in 10 Years
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It goes without saying that your 20s come with lots of new things: new friends, new experiences, new perspectives, and new legal allowances.

As it turns out, they’re also packed with defining moments that will shape the rest of your life. And while it’s usually very difficult for young people to think about things like planning for retirement and investing in life insurance, the truth is that those AARP discounts are closer than you might think. So if you can learn these important things about money and finance now, in the future you’ll be happy that you did, and probably a lot richer too.

1. Pay Yourself First

“Don’t save what is left after spending; spend what is left after saving.” – Warren Buffett

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    While the concept of saving may be a familiar one, paying yourself first is often misunderstood. I didn’t understand the idea until I was well beyond my 20s, but I wish I had understood it sooner.

    Paying yourself first means taking a portion of your earnings and putting it into a savings account or investment that can then work to earn you more money, all while you sleep.

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    The reason why this is so important is because when you’re saving money it grows in relation to the interest it accrues, so the more money you have to save and the longer you’re saving, the more you can take advantage of this extra “free” money.

    Alternatively, by not saving you’re also losing the money that could be gained in interest. That’s why it pays to learn how to pay yourself first.

    2. Learn how to Leverage the Power of Compound Interest

    “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” – Albert Einstein

    In his book

    The Slight Edge, Jeff Olson explains the power of compounding with a penny. A penny doubled each day for thirty-one days is greater than one million dollars today, he explains, and actually adds up to $10,737,418.24!compounding
      Photo credit Cviko Vidakovic

      Twenty-somethings have the best opportunity to take advantage of compounding because of the magic of time and the power that compounding gains as it grows. Unfortunately, many 20-somethings ignore this wealth-making practice and lose valuable opportunity in the process.

      3. Grow Your Financial Education

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        Becoming financially literate is not rocket science, though it can seem like it — especially when the majority of us are not taught financial literacy in school. But just like a higher academic education helps you advance in your career, higher financial education helps you advance in life and in what you can do. Thankfully, there’s no better time than your 20s to start the learning curve with any number of great resources.

        4. Know Your Credit Score and Keep it Up

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          In the September 2014 issue of Success Magazine, Suze Orman, the money guru herself, says that understanding your credit is key to financial health. “A FICO score will determine if a landlord will rent to you. It may determine if an employer will hire you. It determines if a telephone company will give you a phone, and it even determines what your car insurance premium happens to be.”

          As credit scores go, anything below 500 is a red flag and, just like your grades in school, it’s a lot easier to slide down than it is to bring back up, so pay attention. For additional queries and your free credit score, use CreditKarma, Credit.com, or Bankrate.

          5. Live Within Your Means

          “Do today what others won’t, so tomorrow you can do what others can’t.” – Dave Ramsey

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            In theory, if you have an income that can pay for your basic needs, you can eventually amass at least a small fortune by paying yourself first, using the power of compounding, making smart investments, and living within your means. However, most 20 somethings are still honing these practices. Not surprisingly, this is also the time when many people begin using credit cards to pay for things not necessarily within their budgets.

            Living within your means may look like skipping the movies on the weekends, trading your daily Starbucks for a homemade cup of coffee, or forfeiting that shopping spree in favor of recycling your wardrobe for a few seasons. However, when you practice this without reliance on debt, you give yourself a better chance to build a strong financial base. You might not think so now, but if you don’t put down that iced latte, you may be kicking yourself in the future.

            6. Learn to Use Discipline to Manage Income and Expenses

            “We must all suffer from one of two pains: the pain of discipline or the pain of regret. The difference is discipline weighs ounces while regret weighs tons.” – Jim Rohn

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              There’s a great book that every 20 something should read called The Richest Man in Babylon. Trust me, if I had read this book in my 20s, I’m sure I’d be a millionaire by now!

              Through a series of parables the author, George Clason, relates the common experiences of poor money managers and outlines disciplines that lead to lifelong riches and wealth.

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              So imperative to financial health are the disciplines of managing income and expenses that these lessons serve as the foundation of the entire book. Unsurprisingly, failure to have a financial plan with these in mind is the number one regret of people when they reach retirement. Luckily for you if you’re in your 20s, it doesn’t have to be yours.

              7. Learn to Manage Your Emotions Around Money

              “In the world of money and investing, you must learn to control your emotions. High emotions equal low intelligence.” – Robert Kiyosaki

              There’s no denying that having money (or not having it) comes with a lot of emotion. When we have it we’re happy (and often irrational), and when we don’t we’re sad. With each emotion come behaviors that can make or break our financial stability for the future. Many a divorce, bankruptcy, and heart attack have been attributed to the stress that people feel around money that could have easily been avoided.

              Learning to manage your emotions with money is not only a good idea, it’s the thing that will help you to successfully navigate your way through the thousands of financial decisions you’ll need to make throughout your life, so it stands to reason that the better you can do this, the more money you’ll keep.

              While it may be easier said than done, there are always resources that can help you identify your level of emotional intelligence around money and work to improve it at the same time.

              Your twenties are a mixed bag full of fun experiences and new opportunities for growth. But if you can find a way to incorporate the seven practices above, you’ll not only thank yourself later, but even be able to afford to buy yourself an expensive treat!

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              Noize Photography via photopin cc

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              Last Updated on July 20, 2021

              Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

              Financial Freedom is Not a Fantasy: 9 Secrets to Get You There
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              Have you ever considered your life now, and how it would be if you had more time to spend with your family and less worries about money?

              Nowadays, financial stress is one of the most troublesome weights in life. If you’ve ever encountered financial stress, you know the difficulty of not having enough income to pay your obligations or bills.

              Many people say that money is not the ultimate goal of life. While that’s true, money certainly plays a very significant role. The meaning of financial freedom changes with the different phases of our life, but ultimately, it is something that many people strive for.

              In this article, we’ll explain how to capture that financial freedom you’ve been looking for. Read on to learn the secrets to financial freedom.

              Break Free of Your Finances

              Financial freedom is about having a constant flow of cash from your assets to cover all your regular needs.

              When you are not worried about your income, or living paycheck to paycheck, you gain a great sense of freedom. It’s the freedom to be obtain and do what you truly need to make your way through everyday life.

              Gaining financial freedom, though, is a process of growth, making small improvements and gaining emotional strength.

              Though it seems hard to believe, it is really very simple to get financial freedom.

              To do so, you simply need to make sure that your assets exceed your liabilities. In other words, you’ll need to find the sweet-spot where your residuals meet or surpass your expenses. This is something that you can achieve with the proper plan.

              While not every person will accomplish financial freedom, the potential for anyone to do so is certainly there. Anyone can achieve this success, regardless of their income level.

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              Outlined below are 9 secrets that will help you in your goals of achieving financial freedom.

              1. Stop Unnecessary Spending

              We often spend money inwardly, instead of objectively.

              For example, you may spend when you’re anxious, depressed, restless, exhausted, from fear of missing out, or to please others. This is a very unhealthy way to handle your finances.

              To stop this habitual spending, log down all your spending over the course of a month.

              Just as some people keep a food diary, keep an expense diary. Remember not to just write down how much and what you spent the money on, also include the circumstances of why you spent the money. Was it an impulse buy at the checkout line or was it something you planned to purchase?

              This increased self-awareness could enable you to avoid triggering situations in the future when you are considering an impulse buy.

              2. Plan a Monthly Budget

              This is a great opportunity to get serious.

              Take a seat with your spouse or partner and make a monthly budget based on your income, not your expenses. You are never again going to spend more cash then you have on hand.

              Overspending is the thing that led you to more financial obligations. Make sure you decide every month what is coming in and what will be going out and stick to that budget… no matter what.

              3. Cut-up Credit Cards

              Perhaps you are the type of person who always pays your credit card balance in full before the end of your billing cycle, and enjoys the reward points you gain. If this is the case, then you’re already way ahead of the game.

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              If not, you may want to consider ridding your life of the burden that credit cards bring.

              Many cards have strategies set up so that if you make a certain number of late payments, they will raise your interest rate much higher. This can really add up in the long run and you won’t be doing your financial situation any favors. If you’re prone to late payments or have a large balance due on your cards, cut them up!

              Without proper self control on credit card spending and payments, you are basically throwing your money away. To ensure that you have better control over your spending, use only cash or debit for all future purchases (and don’t forget to pay at least your minimum payment on your cut-up cards each month!).

              4. Increase Savings

              There is no doubt that for a comfortable retirement you must accumulate satisfactory savings throughout your working life.

              It’s good practice to save up to 15% of your income.

              Start with your workplace 401(k), if you have one. If not, a Roth IRA (if you are eligible) or a traditional IRA (if you are not eligible for the Roth) are the next logical steps.

              Increase in longevity means you might be able to look forward to 25 to 30 years in retirement, or possibly even significantly more. Investing now in good retirement plans will ensure that you have a guaranteed a stable monthly income when the time comes to stop working. [1]

              5. Invest Wisely

              Consider investing in funds.

              Specifically, you will gain higher returns if you invest in different types of mutual funds such as Debt funds, Equity funds and Hybrid funds with a proper balance, although it absolutely relies on your personal preferences and sense of risk taking.

              To get the most of these benefits, make sure you are investing in a variety of assets. Another resource of investing in mutual funds is SIP (Systematic Investment Plan) where you invest some money every month in funds. SIP works by averaging the per unit price of the stock.

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              Mutual fund investors are aware of the benefits of an SIP (Systematic Investment Plan). For one, it is the most secure way to invest in equity mutual plans so that wealth is created over a long period of time. This plan also helps you to gain a better sense of financial discipline, which will come in handy in all your financial endeavors.

              6. Invest in Gold

              There isn’t really a better way to invest in gold than to have the physical gold itself in your possession.

              You can purchase gold coins and bars from mints as well as from coin dealers and other private sellers.

              Another way to invest in gold is through ETFs (Exchange Traded Funds).

              These are is similar to mutual funds but they are exclusively investments of gold. ETFs are great because they offer more liquidity; the ETF owns the actual physical gold, stores it, and retains the value of the shares. These shares can then be bought and sold in the stock market, and one big benefit is that the transaction costs of gold ETFs are much lower than the that of physical gold.

              With its consistently-increasing demand, investment in gold can be very wise long-term investment to make.

              7. Stash Emergency Funds

              Whether it’s a cash gift or a work bonus, always try to save any extra money that comes your way rather than making unneeded purchases.

              If you get paid every other week, you’ll get an “extra” paycheck (three rather than the usual two) twice a year. Either save those paychecks towards your emergency funds or utilize the money to pay down other obligations, such as loans, credit cards or other debts.

              Make it hard to get your cash.

              Put your savings in an alternate bank, maybe an online bank that forces you to delay for several business days before transferred money hits your regular bank account.

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              8. Find Fabulous Mentors

              Find a mentor, such as a friend or family member, who has exceptional control over their finances and pay attention to everything they do.

              If you do not have any friends or family that are enjoying financial freedom, then find a mentor online! There are numerous blogs and guru websites featuring the advice of many people who have reached financial freedom, and they exist primarily to let you in on how to achieve it for yourself.

              There are also plentiful forums available that share tips and tricks on how to best achieve financial freedom. Read as much as you can and start changing your habits for the better.

              9. Be Extra Patient

              Patience is the key of financial success.

              Being patient can be quite tough, especially when you’re struggling with your finances, but having faith is worth it. You’ll continuously be on the right track if you are taking the proper steps above.

              So don’t be discouraged, even if you are only saving a few dollars a month; it all adds up. Within just a few years you’ll look back proudly at your accomplishments and be glad that you had the patience to get there.

              Financial Freedom for All

              Anyone can achieve financial freedom, regardless of their financial circumstance.

              Use the tips provided above to get yourself on the track to financial freedom and toss your monetary concerns out the window. If you wish to achieve a life with financial freedom for yourself and your family then you must adopt a disciplined approach towards your finances.

              Following the simple secrets above is a great start to making your money work for you, so you can work less and live more!

              Featured photo credit: rawpixel via unsplash.com

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              Reference

              [1] Hartford Gold Group: IRA Retirement Accounts

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