After the economy stalled out as communities shut down in an attempt to contain the coronavirus outbreak, many families were left in a dire situation. But now that restrictions have loosened, you might have the opportunity to work toward a more stable financial situation.
To better enable you to reach any financial milestones, here are three personal finance fundamentals you should aim for.
Simply put, if you spend more money than you earn, you’ll never be able to save up for emergencies or put money toward your retirement. This is known as lifestyle inflation, and it hinders your ability to meet financial goals.
As you started to make more money as an adult, you probably started to splurge on things you didn’t really need, such as a nice, new car or the house of your dreams.
However, improving your quality of life shouldn’t come at the expense of losing your ability to save toward your future. If you don’t get a handle on your lifestyle inflation, you could be stuck living paycheck-to-paycheck for the rest of your life.
Although it can be tempting to splurge when it comes to credit cards, this also means it is way too easy to over-spend on things you don’t really need.
A general rule of thumb you should always aim for is to only purchase things using credit cards that you have the ability to pay off immediately. In other words, if you have to roll the balance over, you couldn’t really afford to make that purchase in the first place.
The harm that comes from doing this is that future interest rates on credit cards can become a large monthly payment that takes away from your ability to budget and save money for future expenses.
A penny earned is truly a penny saved if you actually make the effort to save it. Saving money today can give you more flexibility tomorrow. This means you need to make a real effort toward not living above your means and find ways that you can save money over time.
You’ll want to save up enough money to handle any emergencies that life might throw at you, along with having enough savings to support a comfortable retirement.
Financial experts recommend that you should have enough money on hand to cover at least three to six months of expenses. If you’re over the age of 60, you should have at least twelve months of expenses saved up.