Financial planning is probably the most important life skill everyone needs to have. Money can vanish quickly and when you least expect it to, so it’s important to learn how to properly manage it. With so much to learn, you might feel a little overwhelmed at first. Here’s a guide that goes over all you need to know about financial planning and what it entails.
Financial planning is not just its own thing. It is composed of many different financial aspects ranging from saving to investing. Contrary to what some people might say, you don’t need to be a mathematician to master the concept of financial planning. For young adults, and even adolescents looking to start their own savings account, we’ll be going over everything there is to know.
Debt is an important thing to know off the bat simply because of how detrimental it can be. If you haven’t heard it already, we’ll be the first to tell you that you’re going to have debt in some form or the other. Whether it’s being short on savings or having to pay off a loan you borrowed, debt is most likely going to appear. But it’s not as bad as some people make it out to be. Having debt, and the need to pay off debt keeps you more cautious about your finances, which is a good thing. However, debt will become a problem if you have too much of it. Multiple forms of debt, in particular, can rapidly deplete your reserves.
You don’t want to work solely to pay off your debt. You want to keep it to a bare minimum. A great way to do this is to consolidate your debt into one lump sum. You can do this by going to a private lender and consulting with them about refinancing your student loans into a new one. This can help obtain funds to put away as a security blanket while lowering your interest rates. With a private lender option, you can pay less in interest with more favorable rates and term options than typically offered at banks and utilizing credit cards.
Out of all the aspects of financial planning, budgeting can probably be considered the most important one. It’s what gives you insight into how much money you’ll be parting with each month due to expenses. Crafting a budget is actually simple. All you need to do is list your current income and then subtract it from each expense you have. What can make budgeting difficult, however, is the sudden fluctuation of prices and tacking on additional expenses.
Saving money isn’t as simple as it used to be. Sadly, a lot of companies don’t offer their employees retirement plans. This can make it difficult for retirees to live comfortably. But there are other financial tips for retirement and ways you can save. You can use the 50/30/20 method, which divides your income into increments and is used for different purposes. The 50% goes to necessities, 30% goes to wants and the remaining 20% is stored in your bank. Another way you can save more is to open a high yield savings account.
A high yield savings account is a type of account that offers a much higher ROI. The interest rates attached to these accounts can go all the way up to 25%. Aside from higher rates, they’re not too different from a regular savings account. You just continue to deposit funds and withdrawal when you need to. What’s more is that the funds aren’t taxable upon deposit, but they will be once you withdraw.
Insurance is what ultimately protects you, your family, and your assets from financial loss, and in the worst-case scenario, ruin. There are many types of insurance you can purchase, but some are more of a priority than others. For instance, health insurance is something you must have because it keeps you from being slammed with an out-of-this-world medical bill. Homeowners or renter insurance is another example of a necessary insurance plan. This is what protects your home from damage and theft. Without insurance, recovering from a disaster can be difficult.