Written by Andy Masaki
How you can live debt free and build a strong financial fortress
You may not think this is the appropriate time to discuss retirement, especially if you’re only in your 20s. But, it never hurts to prepare for the future especially when you’re struggling to meet your financial obligations. In that case, how do you manage your finances, live a fairly luxurious life, stay debt free and create a financially secure future? Well, the key to a secure and debt free life is proper management of your financial resources. The sooner you realize this fact, the better for your financial life.
Act now to strengthen your finances
If you really want to remain debt free and lead a financially secure life till your last breath, then start saving money as soon as possible. As the experts say, better late than never. In other words, even if you’re about to retire, you can still get rid of your debts. Remember, every extra penny saved will help you cover your household and other lifestyle-related costs in the future.
If you save $100 a month for 40 years at a 5 percent interest rate, your savings will be far greater than that of the person who has been doing the same for only 10 years or so. Still, even if you only save money for a few years, whatever the amount of your savings, it will help pay for your post-retirement living expenses.
In addition, you must have a holistic financial plan. And this will only be possible when you have your assets properly allocated in a diverse fashion. This part of your personal financial life will gradually become more important as you approach your golden years. The fact is, risk tolerance is directly proportional to the time taken in recuperating from any kind of loss.
Embrace a good budget to have flourishing financial health
Remember, budgeting must always come first, before you plan to pay down your debts or build your nest egg. First of all, saving loads of cash will be of no use if your money is siphoned off by loan sharks or unscrupulous debt collectors rattling you for debt repayments. Secondly, high-interest revolving debts like credit cards and payday loans (which have become illegal in many states) will give you constant stress until you eliminate them. Then you’ll have to use your remaining money to pay for basic living expenses. Thirdly, you’ll also need to include your retirement savings as part of your monthly non-discretionary costs. This will help you determine a proper income figure out of every paycheck for both discretionary and non discretionary spending.
Trim your lifestyle costs to boost your wealth
If you’re a new graduate, try to follow a moderate standard of living instead of mimicking your wealthiest friends’ luxurious lifestyle. You might have a tough life ahead. Save money and try to be prepared for whatever comes.
According to the Federal Reserve Board’s study, approximately 43 percent of people spend more than they actually make. Moreover, recent data show that household debt reached a new record in 2005. A whopping 2039214 number of bankruptcy cases were filed in that year alone, according to the American Bankruptcy Institute.
With that in mind, you should see the need to trim your lifestyle costs. This is absolutely necessary if you want to break free from all your debt obligations . You need to figure out expenses that you can eliminate. For instance, most of people never use all the features of their smartphones. Many people don’t watch all the channels they subscribe to. So get rid of them!
Granted you need a car, but that doesn’t mean you should buy a luxury one. And you definitely don’t need a sports car, at least for the time-being. There’s no point in owning more than one car, since you can’t drive two of them simultaneously.
Costly toys and other high-end goodies are not always as satisfying as you might think. The joy you get from buying them can be short-lived since before you know it another expensive “must-have” toy appears.
So, the best piece of advice would be to recall the golden words of your mother – “ignore what others have or do, just mind your own business and worry only about yourself.”