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
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. This can also involve e.g. student loan refinancing. 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
ones. 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
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
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