The financial events of the last decade brought hardship to people of all incomes and financial status. But, the ones hardest hit were those who weren’t prepared. Some may never recover. Yes, you may have your whole life ahead of you, but if you could avoid the mistakes others have made, you could be assured of making it a good life.
- Living without a Budget: The number one reason why so many people of all ages are in financial trouble today is the failure to live within their means. Budgeting is nothing more than a habit, so the earlier you can start, the easier it will be to maintain as life grows more complex. Setting a strict budget and accounting for each dollar of cash flow will ensure that you not only have the means to live, but also to have the surplus to spend frivolously.
- Not having a rainy day fund: Life happens, and the unexpected can be costly. Whether it’s a car repair, a medical expense, a family emergency, or the loss of a job, something is bound to happen. Your budget should allow for setting aside a fixed amount - $10 to $100 - each month into an emergency fund that is only to be used for, guess what? Emergencies!
- Mismanaging credit: Spending more than you have budgeted for and then making minimum payments on your credit card is the path to insolvency. Building good credit is one of the most important things you do financially. Without it you can’t buy a car or a house, at least on reasonable terms, and you will have difficulty getting certain jobs.
- Not having financial goals: It is never too early to start planning for retirement, but your financial future will also be muddled with plans to buy a house, to start a family, to send kids to college, etc. Setting targeted goals early will actually simplify your life because you can shoot for one at a time.
- Not saving early or often: If, at the age of 25, you start setting aside $100 per week earning an average of 5% until you are age 65, you will have nearly $700,000. If you wait until you are 40 to start saving, it would require $1,100 a month to accumulate the same amount. Time is a wasting asset – you’ll never get it back. The sooner you can set goals and begin saving towards them, the less it will cost you to achieve them.