It’s nice to think of the glass half full, but not necessarily when it comes to money. When you’re overly optimistic, it’s easy to convince yourself it will all be okay. But complacency leaves to inaction, and your financial future depends on you taking the right steps, right now. Here are three steps you can take.
If you can’t see it, and you can’t touch it, you won’t spend it. Why is saving money so tough? Because it means putting aside resources for tomorrow that you’re tempted to use today. And your brain, wired to hunt and gather right now, doesn’t like that. The solution? Mind games.
Build Your Money Roadmap
Like many people, you may be juggling multiple priorities. For instance, do you pay off all your credit card debt before saving or investing? Or, should you funnel more dollars into your retirement fund? And what about purchasing big-ticket items like a house or car? The truth is—the answers to these questions depend on your individual circumstances, your dreams and goals.
It likely took place before your first job, even as far back as when your annual income consisted of Tooth Fairy money and lucky pennies. The very first financial decision you ever made is also one of the most important choices, it’s where to keep your money.
When you first made that decision, piggy banks, sock drawers, and “buried-in-the-sandbox-like-pirate-treasure” all seemed like perfectly acceptable options. As it turns out, they aren’t nearly as super-secret as you might have hoped. Opening a bank account is the best solution, but in order to do that you first need to choose a financial institution—and so the choice becomes “bank or credit union?”
An emergency fund is an essential part of your personal finances. Its importance is stressed in almost every personal finance book and budgeting blog, and yet 26% of Americans currently have no emergency fund in place. Of those who do have an emergency fund, up to two-thirds do not have the often-recommended six months’ worth of expenses saved up.
If an emergency fund is, in fact, so important, why doesn’t it seem that way? Why is it so easy to procrastinate on emergency-fund saving? Learn more in this video.
Budgets: we all know we should have one, and we all know it’s a fairly simple thing to follow—at least in theory. We often map out budgets with the best of intentions, only to abandon them a couple of weeks later. If we design budgets that are too restrictive or too vague, there’s no motivation to follow them.
Once a year you go the doctor for a check-up. Twice a year you visit the dentist for a cleaning. But when was the last time you had a financial physical? Without one, you may not know if you’re financially healthy. Do you have too much debt? Are you saving enough for retirement?
In case you haven’t heard, compound interest is the best.
You may remember it as an equation you had to memorize for math class, but it’s so much more than that. It’s the concept that powers all sorts of savings and investment products and, over time, allows you to turn your money into, well, more money!Even though compound interest is easy to understand—compound interest = more money for you!—those who can potentially benefit most from it (those in their teens and 20s) don’t seem to be taking advantage of it. Savings contributions and retirement savings participation rates are falling among young adults.
When it comes to money, we’re only human. Our “hunter/gatherer” brains don’t like delaying gratification, and that makes saving money a real challenge. The solution? Mind games. Tricking your brain into the right thing for your long-term financial well-being.
Think it’s too late to resolve to improve your finances? It’s not! Here are five tips.