By Steve Azoury, owner of Azoury Financial
Here we go again. Another article that lectures us on what we are doing wrong financially. From spending too much to not saving enough. Yikes! Many people continue to look for ideas that can be helpful to their financial future. However, the failure rate remains very high. Listed below are some ideas that may help you to stay in control of your finances and help determine what direction to go.
Cash, not credit
You should never spend more than you make. However, millions of people end up in debt. One idea that could help control debt is to pay more with cash rather than with plastic (i.e., credit cards). Research shows that people spend more when paying with a credit card. Everything should start with a budget. If your budget is so high that you may be spending money you don’t have, then it’s time to reevaluate.
Borrow, don’t buy
This is a rule that should be applied when dealing with big ticket items, which sometimes get people in a lot of trouble. It’s cheaper to chip in for gas and food for a ride on a friend’s boat instead of the hassle of actually owning one. The same goes for being tempted to buy a hot sports car; rent one for a weekend to get the thought of purchasing one out of your system.
Real time information can activate your self-control by monitoring your accounts often with financial applications. Your actual spending can go down and help control discretionary spending. Try it, it works. It’s always good to cherish your victories, but next time you’re tempted to splurge, recall the pain it took to recover from past bad behavior.
The United States is a great country where you can have a great life and ensure it doesn’t change due to an accident or illness. Disability insurance protects your most valuable asset, which is your ability to earn income. When insuring your assets, here are some things to remember:
- Shop coverage options often, ask what discounts are available
- High deductibles on homes and auto insurance can greatly slash your monthly premium
- For homeowner coverage, improvements such as burglar alarms and hail resistant roofs can also reduce your premiums
- For auto insurance, take collision coverage off older vehicles
Invest in education
There are eight key career skills that are valued across a wide range of professions. Gain experience in these talent areas:
- Project management
- Budget management
- Training program development
- Program management
- Strategic planning
- Financial analysis
- Regulatory compliance
Improvement and knowledge in these areas could have a dramatic impact on your career.
Commit to saving a set amount each month, and for the best results, make it automatic. It’s important to set savings goals. I usually tell my clients that they should be saving 15% of their income and enjoying the rest. Saving is like working out, the goal is to challenge yourself and when you see positive results, it’s amazing.
Cut your taxes
Cut your tax bill by deferring your income, which will ultimately leave more money for you. By reducing your taxable income, you’ll have more money to save and you’ll pay the taxes in retirement when you’re in a lower tax bracket.
Know your credit score
Believe it or not, your credit score reflects your word and can impact many areas of your financial life. A great credit score allows you to take advantage of historically low interest rates when purchasing a home, car, etc. Develop a personality that looks for saving at every turn.
Know what type of investor you are
Many investors behave badly. In volatile stock markets, you’ll see both rational and irrational behavior. Rational investors buy in a declining market to take advantage of lower prices. They will stay invested and continue to make contributions while riding out market fluctuations. Rational investors will also sell and rebalance when the market is rising in order to lock-in gains. Irrational investors tend to sell low and lock-in losses. They will cash out during market fluctuations and wait until it is safe to re-enter the market. Irrational investors also buy high and re-enter the market once share prices are going up.
The fear of losing money is very hard to fight. Take the decline you believe you can tolerate and divide it in half. People who panicked in the 2008-2009 financial crisis lost 57% and missed out on the market’s 240% total return since then.
In summary, money success depends on your ability to save early and often, control spending and making smart investment choices. In retirement, successful people look to explore their passions, travel the world and bond with their family. Having the money needed to accomplish these goals could bring tremendous peace of mind.