Here Are Some Tips to Help Improve Your Financial Future Today - by Olumide Adesina
Editor's note: In this article, Olumide Adesina discusses important steps to help you get a handle on your hard-earned money today and put you on the path to financial fitness in the future.
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In today's world setting up financial priorities, and figuring out how to manage your spending, saving, and investing can feel overwhelming. Fortunately, taking a few basic, but important, steps can help you get a handle on your money today and put you on the path to financial fitness in the future.
Taking some of these steps can help reduce your stress and put you on the way to financial fitness.
Establish a budget and adhere to it
One of the most crucial things you can do to keep your finances in order is to create a budget. You'll be able to monitor where your money is going by keeping track of your income and expenses and making adjustments as necessary.
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The cornerstone of an efficient budget is your net income. Your take-home pay is the sum of your income or salary less tax and employer-sponsored benefits like retirement plans and health insurance. You may overspend if you focus on your gross pay rather than your net pay since you'll believe you have more money available than you actually do. Keep thorough records of your contracts and compensation if you're a freelancer, gig worker, contractor, or self-employed to help manage erratic revenue.
Make future plans
Even though discussing about retiring when you're still young may seem strange, it's never too early to start planning for your pension.
Over the following several decades, the money you contribute to a pension now will have the opportunity to increase.
Although the concept of an "emergency fund" may seem extreme, it is a strategy to ensure that you have some cash on hand for an unexpected need without going into debt.
After creating your budget, you might discover that you have more spare money than you anticipated, allowing you to increase your savings. Your objective should be to maintain three to six months' worth of expenses in an accessible savings account.
Monitor your spending
Budgeting and this are related in many ways. After you've established a budget for yourself, make an effort to monitor your expenditures.
Don't punish yourself if you occasionally stray from your spending plan; it's easy to do. However, it's crucial to maintain your financial discipline.
Utilizing a bank account or app that lets you categorize each transaction so you can keep track of your expenditures can be useful. Then, it will be simple and quick for you to understand where your money is going and where you might be able to save some money.
Living within your means
Living within your means is one of the best things you can do for your finances. Put another way, try to live within your means. You can do this to lower your debt and increase your savings.
Try to keep your expenses below N120,000, for instance, if your monthly income is N150,000. You will then have N30,000 to use for savings or debt repayment.
Investing is a great method to increase your money and make plans for your future, especially if you get started when you're young. It's the main strategy for retirement savings, and it can assist you in achieving many other financial goals along the way.
Young individuals have a distinct advantage when it comes to investing since, if you start early, you have the opportunity to build your wealth substantially more. You can benefit from technological advancements, take on a little bit more risk, and enjoy some other advantages of investing when you're young.
Young folks with a wider time horizon have the chance to take on greater risk because they probably won't need the money for a long time.
Develop your financial literacy level
Early in our adult lives, we can have a healthy connection with money and improve our financial welfare by developing our financial literacy.
Anyone should have a basic understanding of how interest functions. When you are saving, compound interest may be in your favour. Simply said, the next year you will be earning interest on both the initial lump sum and the interest you have already earned when you earn interest on your money and add that interest to your balance. In the short run, this might not seem like much, but it adds up over time.
On the other hand, don't believe that just because an interest rate is low, borrowing is inexpensive. A long-term loan spread over many years might be expensive, even though it might mean you don't have to pay much back each month.
Understanding currency hedging can also benefit your money. You must be aware of some information regarding foreign exchange rates in order to make the most of your transactions, regardless of whether you use an iPhone, watch Netflix on a regular basis, or send money internationally.
- Olumide Adesina is a Financial Market analyst at Quantum Economics