When you are planning to save money, you will have to account for all of the transactions and circumstances that currently concern your life. Learning how to save and manage your money at a young age will equip you with the skills to budget your money at any age. When you are young, there aren’t any strings attached, which gives you the liberty to experiment and come up with a plan to budget for your expenses.
Making smart money moves will ensure that your financial health stays in balance and you have enough set aside for unforeseen situations.
Budgeting your Money at any Age – The 20’s
The 20’s is a transitional period for students, as they are moving on into their salaried life. For 7 out of 10 students, the average college debt amounted to $30,000 in 2017. Paying off this debt will most likely take years and a highly robust budget management. While budgeting, you must ensure to account for the loans and put aside enough money to pay them off as early as possible. Budgeting for your rent and other living expenses, along with the debt, takes serious effort and money management skills.
Cut back on Non-Essentials
Budgeting your money at any age requires you to make a realistic budget which takes into account even the smallest of expenses. Write everything down in a journal or use a mobile application to keep track of your daily expenditures. Before you can actually start creating a budget, you will need sufficient data from your daily expenditures. Once you have data to explain your spending behaviors, it will be easier for you to set limits on some of the items that are related to entertainment, clothing and other luxury items. These are counted as non-essentials and, once you are accustomed to living without them, you will not even feel the difference, however, it will significantly cut down on your costs.
A 50/30/20 rule is often a good way to manage your expenses. 50% of the money should go to essentials, 30% can be allocated to your wants, while the remaining can be put aside as savings to pay off debt or any other purposes.
Get a Savings Account
Planning to get your own car or a house may require you to save a lot more than 20% of your income and may also require getting a savings account. Forget about the money you put aside into this account and only resort to it according to the plan. Find a savings account that offers a higher interest rate.
Budgeting your Money at any Age – The 30’s
Ideally, once you are in your 30’s, you will have adopted healthy budgeting habits and there will be no more issues related to late payments, unnecessary credit card usage and keeping track of your expenses. This is a career transition phase and there is a high probability that you could get married and have a family. If so, managing your finances becomes even more significant.
Open a Retirement Account
Amidst all the money management paradigm, you must start making contributions to your retirement account. The IRS retirement account is a great option in the case that you do not have an employer-sponsored retirement account. This is one of the most critical times in budgeting your money. Setting up a retirement account at this age will ensure that you put enough into it for a better future down the road.
This is something that you should pick up in your late 20’s and carry it forward into your 30’s. You never know how things could turn out, so it is better to be prepared rather than sorry. In case you have not saved up for an emergency fund, you may end up dipping into your retirement account or maxing out your credit cards, which we assume you would clearly not find desirable.
Budgeting your Money at any Age – The 40’s
Whether you have settled into your family life or are still passionately pursuing a career, the 40’s is the best time to lean towards investing money and generating income. This will ensure that you are generating enough side income to pay for luxury goods and fulfill your desires. Making smart investments is key and you should never put all your eggs in one basket.
Generate Alternate Incomes
Even if you are happy with your career advancements and saving enough money for bad times, we suggest that you invest your money into stocks, real estate, trading or any field that is related to your expertise. It will allow for you to maintain a healthy family life while catering to all of your additional expenses. Both your short and long-term goals can be achieved quite early, given that you make smart investment decisions. The best strategy is to diversify your investment portfolio to minimize the risk and avail all of the benefits of budgeting your money.
Revise the Budget
Your saving and spending goals need to be revised amidst growing expenses as you may have a family to look after now as well as life insurance, medical bills and paying off tuition fees. This can be an arduous task if you fail to make necessary budget amendments.
Budgeting your Money at any Age – The 50’s and Retirement
Now that, hopefully, all debts are paid off and there are no more tuition bills remaining, you can shift your focus towards retirement. Get a hold of your finances and plan exactly for how many more years you want to work and get into some real investments in the areas you have benefited the most from your recent experiences.
Reconsider your Choices
This is the time when you should really start doing what you wanted throughout your life but have been unable to do. For example, if you wanted to travel and couldn’t, you could plan a trip. Make some adjustments in your lifestyle to account for the travel expenses, as we expect you to be a pro at budgeting your money by this age.
Consult a Retirement Planner
Though you have learned to manage your own money by now, it can still prove beneficial to have a second opinion. Consult with a retirement professional and discuss your investment decisions and options. You might be missing out on something which could dramatically increase the return on your investments.
Following the above mentioned budgeting tips will ensure that you retire with grace and freedom.
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