Maybe you’re still at that stage of early adulthood where money … just … appears out of nowhere to cover expenses and the like.
Maybe you’re at that stage of discovering that, from now on, the only way money appears is due to what you’re doing to earn it.
Maybe you’ve passed both those stages and simply wonder why the money’s going somewhere and you’re still going nowhere.
If so, maybe it’s time to list a few fundamentals that not only sound good, they’re solid financial fundamentals:
1. Actually make a budget. No, seriously, make a budget.
Before you can do anything — make investments, save for retirement, save for a vacation — you have to know how much you spend.
You can do this the hard way, or you can use Mint. Its basic budget- and spending-tracking tools are free. The trick here is to figure out how much you spend in a typical month and then figure out how much you have to save.
2. Prune your subscriptions.
Look at your subscriptions.
- Are you actually going to the gym that much?
- Do you really need Hulu Plus and Netflix?
- And cable TV?
Subscriptions work by masking their true annual — and longer — cost, so be sure you’re only subscribing to stuff you really want or need.
3. Invest if possible, but keep it simple.
Socrates may or may not have said, “I am the wisest man in Athens for I know nothing,” but he would have been an excellent investor.
When you’re choosing a mutual fund or funds for your 401(k) or other retirement savings, pay attention to the fees, especially the gross expense ratio, which is an all-measure of the costs of running the fund.
You’re probably not a great judge of which mutual fund strategies will work in the future, but it’s easy to see which are the cheapest.
4. Be careful with credit cards.
If you have a steady income, going into some credit card debt isn’t the worst thing in the world for one-off expenses.
But using your credit card — assuming you don’t pay the full balance every month — on routine expenses is a recipe for carrying a larger and larger balance and then making interest payments that are always higher than you expect, leaving you paying off your balance for longer than you think
5. But be a credit card baller, if you can.
If you’re stretching on your credit card, try to find the lowest interest rate and annual fee.
But if you’re paying off the full balance and spending a high amount, then look around for which card has the best rewards program. Mint has a great guide, so there’s a simple research resource.
If you’re a responsible credit card user and aren’t getting the best rewards, you’re just leaving money on the table.
6. Be prepared for a big financial snafu.
Big financial problems happen when people face huge expenses from something like a health emergency or an income suddenly drying up because they lose their job.
It’s vital to insure yourself against low-risk, high-impact events. This means getting some sort of health insurance, even if you’re young, strong, and saving. And don’t think you’re at risk of losing your job.
7. Spend on experiences, not stuff.
This is a little philosophical, but it’s unlikely that buying another thing — clothes, shoes, sunglasses, whatever — is going to make you that much happier for all the money you spend on it.
But activities you do with people you like — day trips, going out to eat with your friends, concerts — will make you happy every time. And having good relationships is the best investment you can make.