Finances are a timeless topic of interest. Everyone is always keen on making and managing money.
It’s in our nature! Providing, being abundant.
Historically, we were “hunter-gatherers” because we love to gather, collect, and have. It gives us security, safety, and status.
And we all crave these things.
Most People Are Financially Illiterate
While finance is perpetually relevant, it isn’t directly taught in schools, leading to generations unprepared for financial management.
The system creates literate individuals who are financially illiterate.
How to Get Richer Than 99% of Your Peers
There are countless techniques financial advisors recommend, and you can find books, articles, and blog posts to read for years. However, modern financial advice often faces two main issues:
- Commission-driven advisors and employees may push advice that benefits them more than you.
- General good advice is often explained in overly complex terms, making it hard for the average person to understand.
The 5 Tips to Improve Your Finances
1. Practice Mindful Spending
Start by being aware of your money flow. Don’t panic and cut all luxuries immediately. Live a normal week, maybe with a few extras, to understand your average spending while maintaining comfort.
Break down your spending into categories using your bank’s app or another tool to see where your money goes.
2. Practice Strategic Spending
Once you understand your spending, address any behaviors leading to debt or overspending. This often stems from a lack of patience, a poor relationship with money, or impulsive buying.
For example, instead of buying a new phone impulsively, plan when you can afford it without strain. If you face FOMO (Fear of Missing Out) on a trip, evaluate if it’s worth altering your budget or if it’s better to skip it.
3. Pay Off Your Debts First
Debt is common and not inherently bad. It can be a tool for growth, as seen with companies like Apple.
My rule: Determine how much you can save in a year without being frugal and use up to 70% of that for debt repayment. If you can save $30k a year, you can comfortably handle $20k in debt payments. Always maintain a savings buffer to avoid further debt.
4. Organize Your Accounts
Research before opening any account. For credit cards, look for low APRs, long interest-free periods, and rewards. For debit accounts, avoid high fees and look for benefits. Always negotiate for better rates and benefits with your bank.
5. Invest
Invest only when you can do so without sacrificing comfort or going into debt. Allocate your savings wisely: 50% into a long-term ISA, 40% into stocks and ETFs, and 10% into higher-risk investments.
Conclusion
Following these tips can significantly improve your financial health, regardless of your background, education, or income level. Most people don’t follow these rules, leading to financial difficulties. Implementing these habits can set you apart and help you achieve greater financial success.
Follow for more insights and stay financially savvy!