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Making an investment of any kind takes vision and consistency, but it also requires some serious sacrifices that many women are not willing to make. If you want to seriously change your life, then here are some of the most important decisions you need to make right now regarding your money.
#1) Create a Budget
Budgeting is probably the least glamorous thing that you can do with your money, but we promise that in the long term it will pay off. To create a budget you first need to figure out what things are absolutely mandatory expenses and which things are not. Monthly bills for example go into the mandatory pile and should be tackled before other expenditures. Take the amount of money that you make in a payment cycle and then subtract all of your mandatory expenses until you see what you have left. Then prioritize the rest of your expenses and subtract those as well.
With what’s left, start an emergency fund if you do not already have one. If you are worried that you’re going to be tempted to use the money, open it in an entirely different bank account so that isn’t even an option on your radar. With some money set away you can avoid true emergency situations that might occur in the event that something unexpected happens in your life.
#2) Pay Off Your High Interest Credit Cards
If you’re making the minimum amount payments on your credit card (or cards), then you’re eating tons of money each month in interest. While it’s great to be in a place where you’re making payments on time and building up a great credit score, you also don’t want to be wasting money. When you’re trying to build a savings account you need to also work on paying down those cards which will give you more money to invest in the long run.
While you will also want to pay off loans and whatnot, tackle the high interest credit cards first. As you can imagine, the higher the interest rates on borrowed money, the more money you will owe over time. Work on the balances with the highest interest rates first so that you can truly cut down on your payments and start to save more money.
#3) Contribute to Your 401(k)
If you have the option at work to start saving for your retirement, you should absolutely be doing so. No question. Even in your early twenties it’s beneficial to contribute to a 401(k) because you end up not getting taxed on the money that you put in there until it’s taken out. By that time it has grown interest, so you’re just lowering your taxes in the meantime while you protect your future.
If your employer offers a matching percentage for your contributions, match up to that point so that you can take full advantage of that money. This can be anywhere from three to six percent of your salary which can definitely add up over time. The longer you have money invested, the more interest you can make on it. Interest is basically free money that you are awarded for being patient and not spending it.
#4) Contribute Even More to Your Retirement Account
It might sound strange, but sometimes investing more into your retirement account can earn you more money in the long term than totally paying off lower interest debts. Naturally you’ll want to continue to make your car payments and whatnot, but there’s nothing wrong with owing for a while when you have other money stashed away and working hard for you. The maximum amount you can contribute to a 401(k) is $18,000 a year which for many people isn’t going to happen, but your goal should be to put in as much money as possible each year.
#5) Pay Off Low Interest Loans Last
The last thing you should be worrying about is paying off low interest loans, like government student loans and car payments. In some cases the interest on these is even tax deductible, so you should wait to eliminate these until you have a nice nest egg growing and have covered all of your higher interest rate loans.
#6) Prioritize Everything Else
Naturally you’re going to want to spend some of that hard earned money throughout the years, but it’s important to pay attention to how much of it you’re willing to spend and what on. You don’t want to look back and realize that you could have bought a car instead of your purse collection or something. (Depending on what’s important to you.) Avoid using your credit cards and getting yourself further into debt, and purchase only what you truly need and want.
Do you feel ready to take on your finances in a new way and actually make a difference in your fiscal future? Let us know if you decide to follow any of these tips or what else you’re doing to get on track and stay there!