There is a famous saying that a fool and his money are soon parted. Truer words have never been spoken. It is possible for just about anyone with the right motivation to earn money. What separates those who are financially successful frequently has more to do with how they spend that money than with how much they make. Here are some recommendations to help you achieve fiscal responsibility and stop living paycheck to paycheck.
1. Avoid Frivolous Spending
Many people spend every penny they make just as quick as they earn it as if it were burning a hole in their pockets. Obviously, some spending is necessary. Food, clothes and lodging are universal essentials that are requisite to survival. Paying $50 a week for groceries is a much better investment than spending the same $50 for a single meal at a ritzy restaurant.
2. Utilize Discounts
In addition to reducing spending by cutting overall consumption, it is also possible to cut down spending by using discounts for things that you would have to spend money on anyway. Cutting coupons and buying when items are on sale can be a very responsible way to use and conserve your money.
3. Start an Emergency Account
Everyone needs an emergency account for unexpected expenses. An account of $500-$1,000 can definitely help if a refrigerator or a washing machine goes out or if the car breaks down and you have no way to get to work. If you have emergency funds put away, you won’t have to put something on your credit cards and bury yourself in debt.
4. Save up Six Months of Salary
In addition to a small emergency account, a savings account that is intended to replace around six months of salary is a responsible goal. A job loss can happen at any time, and the recent recession has seen some people out of work for over a year. Having several months of income in a bank account can help supplement a meager income from unemployment insurance.
5. Get Adequate Insurance
Insurance is a method of risk management. It is possible to over insure, but a homeowner’s or renter’s policy is a good investment. Disability and life insurance can help out a family in case of disability or death. As one ages, he or she might also want to look into long-term care insurance to help with nursing home expenses. Unemployment insurance will give you some security in case you lose your job.
6. Save for Retirement
With the demise of traditional pensions, saving for retirement is increasingly falling upon the shoulders of workers. Putting money away in a 401k or a Roth IRA can be a great way to save for retirement. Each has differing tax ramifications. Therefore, it is important to check with a financial planner or online financial recommendations to see what works best.
Money can be a great tool. Poor financial decisions can lead to stress and unhappiness. Those who are able to follow these guidelines will avoid stress and come out ahead in the end.