Sometimes it’s hard to avoid making mistakes with your money. You might decide to buy a new car and then you lose your job.
Or, maybe you just don’t keep tabs on how much money you’re spending and suddenly you find that you have thousands of dollars in credit card expenses you can’t pay off! Maybe you just aren’t the type who likes working hard or you don’t have the skills to get a better paying job.
But you don’t have to make six figures to avoid making personal financial mistakes. In fact, many people have amassed considerable savings on very moderate incomes. In order to help you accumulate more wealth, Surf Rate has put together the following list of the things that will help you avoid financial disaster and get on the path to becoming more financially independent.
Cash flow is the key to financial success. If you spend more than you make, you will always be poor. Learn to live within your means and you’ll never find yourself in the poor house. It sounds simple yet most people have difficulty learning this most important of personal financial lessons! Start by keeping a simple budget. Start with bills like rent, utilities, etc. that you must pay each month and have little or no way to eliminate or reduce. Then, look at variable expenses like food, gas, clothing, etc. and try to find ways to reduce these expenses until you are certain that you are NOT spending more than you earn each month.
Avoid High Interest Debt
This relates to the first rule; if you overspend you most likely will find yourself with credit card or other personal, unsecured debt. This is the worst kind of debt since the interest rates will be very high and making minimum payments means you can’t pay it off. Better to avoid using credit cards for discretionary spending unless you have the means to pay the balance at the end of each month. Also, if you miss monthly payments on credit card balances, not only will you pay higher interest rates and late payment fees, you’ll also be destroying your credit record, which only makes it that much harder to qualify for real estate or other lower interest rate loans. This is the classic trap that so many people fall into. If you do find yourself in this situation, don’t despair. You can pay off your high interest loans and learn from the mistake!
Own Your Own Real Estate
If you always rent you’ll probably never accumulate any real wealth; rents go up and once you’ve paid rent it’s gone and you’ll never see any of it back again! Save enough money to make a down payment on your own home or condo and you’ll start to see benefits very quickly. You get a tax deduction on the interest you pay for starters. Plus, your payment will be fixed (assuming you get a fixed interest rate loan) so that in a few years you’ll find you are paying less each month to own than you would if you were still renting. And most importantly, as the economy and housing markets recover from the current recession, you’ll be building equity in your real estate, which is like getting money for free!
Build a Nest Egg
Once you’ve learned to live within your own means and own some real estate, its time to build a nest egg by setting some money aside in savings each month. This will help you make it through difficult financial times by giving you a “cushion” in case you lose your job, have any type of health problems, etc. The vast majority of people live from paycheck to paycheck, making it stressful and difficult to make it through bad times.
Increase Your Income
Most people are happy to go to their job every day and take weekends and holidays off. So, they are dependent completely on their take home pay, which can be very limiting after taxes, medical insurance , social security, etc. are taken out. So, you need to find some way to generate extra income. Think about your skills and interests; most people can find creative ways to generate supplemental income if you put your mind to it! Get a part time second job, start your own part time business. If you are in the building trades, you can always find small side jobs to work on! Even if you have limited job skills, you could work part time cleaning homes, baby sitting, etc. You simply have to get over the thought process that you can’t do anything to make more money!!!
Never Lend Money to Friends or Family
Loans between friends almost always end badly; while the person probably has the best of intentions to repay the loan, they may not be able to. Also, if you decide not to follow this rule, be sure to write down all the terms of the loan and both parties should sign the agreement to help avoid any misunderstandings. Lastly, if you loan money to family members or friends, expect you probably won’t ever be repaid! Otherwise, not only may you never see the money again, but you may end up losing a friend or finding yourself estranged from a family member.