When it comes to money and financial planning, most people are fairly unprepared and unaware of where to even begin if they wanted to. That’s not to say you’re unable to take control of your money. It only takes a bit of a realistic examination of your cash flow, accountability and planning.
It’s never too early to plan for your future. When you’re just beginning your adult life, it probably seems ridiculous to contemplate retirement. When you’re young, it’s difficult to grasp how planning for your future as early as possible is in your best interest. Chances are, if you wait until you start thinking about retirement, you’re already very far behind.
Be realistic about who depends on you. Life insurance is also an important part of planning for your future. Do you have a spouse? Children? Think about the people who would suffer if your financial support were to suddenly stop. In any of these instances, you should make sure you have a life insurance policy. Familiarize yourself with the terms of the policy and ensure you can answer with certainty, “is life insurance is taxable?”
Chances are, if the life insurance is set up as a single lump-sum payment, you probably don’t have to worry about that income being taxed. However, there are different payouts and provisions that could subject your heir to taxes.
In addition to life insurance, most employers offer disability insurance. This is coverage that pays a portion of your wage in the event you’re unable to work due to serious injury or illness. It can supplement your Social Security disability so you and your family are not struggling financially if you’re unable to work.
Steps to Take
There are certain steps you can take to start gaining control of your money instead of letting it — or debt — control you. To have some idea of what goals are attainable, you have to understand how your money flows. Both income and expenses are an integral part of financial management. Go through your monthly bills so you know how much you need for your living expenses. Make a list of your outstanding debt so you can form your plan of attack to get rid of those added expenses.
Having a budget is a huge portion of taking control of your cash flow. Keep in mind that your budget is only useful if you stick to it! Although understanding where your money goes is important, if you don’t follow your plan, all of your budgeting efforts were made in vain.
Now that you know where you spend your money, determine where you can cut back on expenses. Are you paying subscriptions to several different streaming services? Figure out which ones you use the most and cut out the others. Are you subscribing to newspapers or magazines that you never really get around to reading? Get ahead of the money game by canceling those periodicals and keeping that extra money instead of squandering it away.
Do you have to drive through that trendy coffee shop everyday on the way to work? By bringing your own coffee from home on that morning commute, you’d be amazed at how much money you’ll save.
Aside from outstanding debt, the biggest expense you have is the money you spend without planning or thinking. That’s not to say you should live like a pauper and deny yourself everything you enjoy. Understand that every purchase you make is a choice; those choices should be intentional ones.
The hardest part of being responsible with your money is being honest with yourself about where your money goes and taking control of how you spend it. You’ll be amazed how much you’ll have to pay down those credit card bills once you stop mindlessly spending. Have a plan and stick to it, your future self will thank you.
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