Personal finance is a tricky subject since everyone expects you to be perfect at managing money right out of the box. The reality is that most people are never taught money-saving tips to help them start off on the right food. Let’s take a look at some of the best personal finance tips for living a debt-free lifestyle.
Avoid Impulse Purchases
Waiting to make a big purchase until after you’ve slept on it can really help curb those impulse buys. It can be difficult to resist temptation when sales come into play. For those situations, thinking about how much you need the item versus the money to purchase it is a good thought experiment in time-sensitive situations. The next time you are interested in making a purchase that may not be a ‘necessity’, take a day to think about first.
Your Budget Isn’t Keeping You in Financial Jail.
Many people see budgets as a restraining thing that keeps them from living their best financial life. The reality is a budget separates your necessary for living money from your spending money. Most people start by slashing all of their “extra spending money,” then give up when they grow frustrated.
A reasonable allocation will account for spending money while still making sure all of your bills are paid. A good rule for setting up is the 50/20/30 rule. This rule says 50% of income should be for necessities like food, rent, and utilities. 20% should be saved for an emergency fund. 30% should go toward entertainment spending after the first 70% has been tucked away.
Think About Your Financial Plans on a Broad Scale.
Many people ease themselves into making impulse purchases with the phrase; you only live once. It’s technically accurate, but it doesn’t account for the quality of life you’ll have when you’re 80. Your financial planning should be on a decade scale with plans for what you’ll do as a new retiree. Thinking about how your current financial decisions will impact your older self can help keep you on track. Retirement planning can also help you set realistic expectations to achieve your financial goals for your older self.
You Don’t Have to Die to Benefit from Life Insurance.
Life insurance should be a vital part of your long-term financial planning, but it goes beyond a life insurance payout when you die. Some life insurance policies come with accelerated benefits that cover a variety of costs. An insurance policy with these living benefits riders could be a boon to someone diagnosed with a terminal illness.
Credit Can be Ruined Overnight.
Missing just one credit card payment can set you back for seven years in terms of credit history. A good financial plan will include reminders for payments, so you never miss a payment. Equifax estimates that one missed payment could result in a 90-point decrease in FICO score. Financial planning doesn’t have to be something scary and to be avoided. With good personal financial planning, you can live a debt-free lifestyle that minimizes the amount of time you have to spend worrying about money.