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Practical Financial Tips From a Successful Investor

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Practical Financial Tips From a Successful Investor

Gaining control of your finances might look impossible, especially if you find yourself swimming in debt or without a high paying job. Financial freedom is never attained overnight, however, so keeping things in perspective and sticking to a plan is very important. By learning what successful investors do to maximize each dollar, you can quickly put yourself on the right financial path.

Create a Realistic Budget

There is no point in creating a budget if there is no way that you can stick to it. If you always spend $200 to commute back and forth to work, do not allot only $150 of your budget towards this, as you will never meet your goals. All of your goals should be reasonable and based on what you have spent in the past, as this will give you a better chance of reaching them.

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    Learn About Healthy Spending

    Most consumers have no idea what healthy spending looks like. As a general rule, go by the 50/30/20 plan, which means that 50 percent of your monthly income goes towards needs, 30 percent goes towards wants and 20 percent goes towards your savings. This plan can help you to avoid financial mistakes and will build your savings quite quickly.

    Decide on Needs

    Perhaps the largest financial mistake that people make is classifying wants as needs. Many of the items that you spend money on each month are luxuries, rather than necessities. If you can survive without an item, it should be labeled as a luxury and, therefore, you should not spend money on it unless you have money after you have purchased your necessities.

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    Only Spend Money That You Have

    Some people make the mistake of spending money before it arrives in their back accounts, such as relying on a bonus that is not guaranteed to come. This is always a gamble because a bonus is never a sure thing. Choose your spending based on your current financial state, rather than your projected financial state, as this can prevent some serious problems in the future and leave extra money for investments.

    Use Cash

    Overusing credit cards usually leads to financial problems. If 20 percent or more of your monthly income goes towards paying off your credit cards, it is a sign that you have a problem that could escalate in the future. If you are unable to pay off your entire credit card balance each month, you end up paying more for all of your purchases. This limits the amount of money that goes into your savings and will prevent you from reaching your financial goals.

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    Work Towards Retirement

    Many people do not even think about retirement until it is too late. The main reason to start putting money away for retirement right away is the compounding of your earnings. Basically, the earlier you begin putting money away, the faster this money will grow, since it compounds monthly. Starting earlier also means that you can put less money in your retirement fund each month and still end up with the same payouts once you retire.

    Save Anything

    It might seem pointless to put a few dollars into an account each month, but this money really does add up. It is always a good idea to save something, rather than nothing, as this money will grow over the years. Even if your lifestyle has made it so your bills and loans are high in relation to your salary, if you can invest some money while you are in your 20s, it could grow to something significant by the time you reach your 60s.

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    Avoid Getting Ahead of Yourself

    Countless young people make the mistake of changing their lifestyle too greatly once they start making money. While it is a good idea to reward yourself for working hard, make sure that this money is spent in a short-term manner, rather than one that you could pay for down the line. For example, it is perfectly fine to take a vacation or buy yourself a new computer, but you should avoid buying a fancy car or moving into a new apartment just because you have a little extra income. Purchasing these things commits you to higher spending in the future, which limits your ability to invest.

    Diversify Your Portfolio

    Simply put, investing in a number of different things lessens your risk. While a diverse portfolio is also less likely to outperform the market, it allows your more successful investments to float any investments that do not work out for you. When starting out, this is the best way to prevent yourself from taking a massive hit.

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    Look at Bonds

    When looking for investment ideas, United States Treasury bonds are about as risk free as you can get. This is because the government is highly unlikely to ever default and high interest rates are the only thing that can hurt your return. If you are looking for a place to start investing, this is as good as any.

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    Courtney Gordner

    Courtney is a passionate writer who shares about lifestyle tips on Lifehack.

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    Last Updated on July 20, 2021

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

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

    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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