1. Quit maxing up your credit cards.
Unfortunately, managing our credit cards is not up to credit card companies; it’s up to us.
It is recommended that you spend no more than 10-30% of your credit card limit and for good reason.
The more you spend, the more challenging it can become to pay off the balance.
If you consistently struggle with maxing out your credit cards, give them a rest, and stop using them indefinitely until you pay your balances off.
Stop hurting yourself.
2. If you want to burn money, OPT-OUT the 401k match
Not signing up for your employer’s 401k match program is like taking a pile of cash and burning it. I don’t recommend you do this unless you want to throw away money.
3. Minimum payments don’t do shit.
Paying the minimum payment is one of the biggest traps credit card companies set for their customers.
Minimum payments will keep you in debt for decades — even for smaller balances.
If you desire to get out of debt, you won’t ever get out by paying the minimum payment.
Always pay more than the minimum requirement.
I paid off my car note in half the time, without a full-time income, by paying more than the minimum payment. It was one of the best decisions I ever made.
Do yourself a favor and always pay more than the minimum payment. You’ll save yourself thousands of dollars in return and unnecessary time dealing with debt.
4. Look, you don’t need any more credit cards.
Are you in debt? If so, you probably don’t need another credit card — especially if most of your debt is personal (i.e., credit cards and personal loans).
Take a break from the applications and focus on paying off your credit cards.
“Should I order another credit card since mine are maxed out?”
No. Use a debit card or cash.
My Credit Card Rule
If you aren’t good with credit cards, stay away from them.
The more credit you get, the more it shows how good or bad you are with money.
5. You can’t afford the car you have (yet).
The 1/10th rule states that you should spend no more than 1/10th of your gross annual income on the purchase price of a car.
Did your last car cost more or less than 1/10 of your gross annual income?
Most people will respond, “More.”
Making a car purchase that is only 1/10 of your gross annual income is not common practice.
Stick to this rule; you’ll likely experience less financial anxiety and more flexibility within your budget.
Not having a car payment is liberating in a society where most people have one or more per household.
6. Track your money.
You can’t manage what you don’t manage.
If you aren’t following a budget, how will you know what money you’re bringing in and sending out?
You won’t, and your estimates will always be just that…estimates.
Use an app or a spreadsheet, and start tracking your spending.
Once you get into tracking your spending, you don’t have to be scared to look at your bank account because you know money is always there.
Understanding your spending habits through habitual tracking is beneficial so you can pivot where needed.
7. Not planning is planning to fail.
Heads up: you may not want to work forever, and eventually, you will need income to sustain your lower productivity years.
The longer you put off investing for your future, the less you’ll have saved for retirement, and the harder you’ll have to work to save money for retirement.
The best time to start retirement planning is when you’re a kid.
Compound interest is best friends with the young, but is friendly to everyone.
The second best time to start retirement planning is now.
8. Diversify your income streams.
Do you only have one source of income? This is a financial red flag.
One of the easiest ways to dig yourself into a financial hole is to rely on one source of income; this is a frequent starting point for accumulating debt. Avoid this entirely by always having an active plan b.
At a minimum, maintain two sources of income at all times. More is better, though.
The Benefit
Do this and find yourself more peaceful if you lose one source of income. You will not need to worry yourself into a frenzy because you already have something else to cover you while you find a replacement for that income.
Unless, of course, you’re living above your means and your lifestyle is heavily dependent on both sources of income.
Live below your means—whether you’re earning more or less.
9. Your rent or mortgage is over budget.
Americans love buying bigger houses than they need and can’t afford. Then there’s renting; many fall into the trap of paying prices too high for their income.
Stop throwing all your money away on housing. Get what you need, and maybe a little more, but avoid being that person that throws away 30%-50%+ of their net income on rent or a mortgage.
Aim for 20% or less on housing costs.
Under 15% is even better.
10. Appearances mean little.
There are more people nearing bankruptcy than you might think. Still, you would never know it by the things they buy (e.g., furniture, shoes, clothes, tech gadgets, gaming systems), parties they attend, recreational entertainment they invest in, bills they cover for their friends and the friends of their friends, and all the traveling they do.
One thing that is consistent for these people is they remain over-invested in their appearance and less invested in their financial well-being, unfortunately, to their detriment.
You don’t need to impress anyone. It’s an empty pursuit filled with debt, discontentment, and dissatisfaction.
11. Build the emergency fund.
If you don’t have an emergency fund, build one immediately. Most cannot afford a $500 expense without pulling out their credit card.
The emergency fund is your best friend. Dip into your emergency fund instead of going into debt when an inconvenience pops up.
Phase 1: Save 1-3 months of expenses.
Phase 2: Save 3-6 months of expenses.
Phase 3: Save 12 months of expenses.
Phase 4: Invest ferociously.
Ensure your emergency fund is liquid but not too liquid. Some people get tempted by their emergency funds and spend their hard-saved dollars. Investing your emergency fund savings is a good idea so that money isn’t sitting around bearing little interest.
However, you don’t need to invest your emergency fund savings aggressively. The goal isn’t to lose but to gain modestly over time.
12. Don’t allow your income to grow stale.
If you work for someone else, you’re lucky if you get a yearly pay raise. And if you do, it might only be 1-3%. If this is the case, you must practice advocacy or move elsewhere.
One of the worst things you can do for your finances is not to increase your income consistently.
Thank you for reading. Remember, financial health is part of self-care.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.
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