I was a bit impulsive in my 20s. If I could take it all back, I would have saved more and not wasted money on little things. The good news is that I’ve learned my lesson and I am in a much better shape now. I have an interest in personal finance but I am not a financial whiz. We are often bombarded with financial advice, most of them complicated. To tell you the truth I tune a lot of it out but I learn a little something each day and I take things slowly. I currently have a system that I am comfortable with and I will continue to improve.
Here is what I am currently doing:
1. Pay yourself first: Allocate a portion of your earnings towards retirement, investments, an emergency fund and a savings fund. Everything else is used for day-to-day things such as expenses. Start doing this right away, even if you only have $20 to start. It’s better to do it now than wait 10 years down the road. Start with something small then work your way up. In the past, I’ve tried budgeting down to the last penny but I somehow could never stick to the plan. With the way I am currently doing things, the funds are being sent to different accounts and lessens the temptation to dip into them. I manually transfer the fund every time I get paid but I highly suggest automating this part through direct deposit, that way you won’t even miss the amount.
2. Read personal finance books, blogs or columns and learn as much as you can about investing. I recommend David Bach’s The Automatic Millionaire, Robert Kiyosaki’s Rich Dad Poor Dad, Carrick’s Best Reads and Mr. Money Mustache.
3. Live beneath your means and DO NOT get into credit card debt. Enjoy your money (wisely) but don’t squander it. I used to eat at crappy places just because it was convenient. Bad move. Why pay $20 for a sub-par meal when I can take the $12 and make something nice at home and stretch the amount to 2-3 meals. I had the same bad habits with fashion. I used to buy a bunch of little nothings that hung my closet. Now I choose better quality pieces that will be worn many times over. I am frugal but I am not a penny pincher. I like splurging on nice things and fancy eats but don’t do it on an everyday basis. I did back then and it got me in big trouble. Yikes. Lesson learned.
4. Set financial goals. Do you want to retire in 10, 20, or 3o years? My personal goal is to have the option to retire in 5-10 years and leave the 9-5 rat race or be secure enough to take time off and find a career that I love (if I already have not done so). That means having flexibility to experiment and try new things and being financially secure to leave my day job at my own volition without having to worry about finances.