For the twenty-somethings, the standard advice would be to take a close look at their finances and skip those $5 lattes and Starbucks in order to put that money in the bank. However, Adam Nash, the CEO of Wealthfront says that giving up the $5 latte is secondary to the more important questions of controlling your finances. Do you follow a frugal budget? Are you spending much less than what you make in a month? Are you saving enough funds to meet your goals? If the answer to all these questions is ‘yes’, sit back and enjoy the latte. But if your answer is ‘No’, you need to buck up with your personal finances. Here are some steps that you can take in order to stay on top of your finances.
- Know how emotional you are about your money: It is true that when it comes to money, you get a bit wobbly. For instance, you work pretty hard to pay off your mortgages whereas if you would have kept your mortgage for a longer time, you could have got tax breaks for a longer time on your income. Hence, when you take steps to remain debt free, consider the pros and cons of prepaying so that you don’t incur fees and penalty charges in the near future.
- Save enough for your emergency fund: The idea is to save enough money so that you live without income for at least 6 months. An emergency fund is more like a buffer and it protects you during times of crisis. In case you’re someone unfortunate who is being derailed with unforeseen events like medical bills and car repairs, then it is this chunk of cash that will help you avoid falling into debt.
- Think of your net worth: According to a well-known personal finance blogger, always keep a bigger picture of your finances by taking a look at your net worth and not your net balances. If it’s going upwards, you’re definitely doing great. This will always keep you accountable for whatever you do with your personal finances.
- Negotiate with your creditors: Most debtors think that their creditors always try to push them further into debt but this is not the fact. You should always negotiate with your creditors and keep them informed about your present financial state. They might have some alternative option for you with which you can get out of debt with ease. You can also get help of the IVA Debt help and advice and obtain an improved debt repayment plan.
If you absolutely love your early morning cup of coffee at Starbucks, you should go for it but at the same time make sure you spend less on the other areas. Try to follow a budget throughout the month so that you have an idea of what you’re spending and what you’re earning. Keep evaluating your budget every month and make necessary changes.