“Mo’ money, mo’ problems”. Not only is this the name of a song made by the rapper “The Notorious B.I.G.”, it’s also applicable to real life. With economists predicting a recession occurring this year, making good decisions with your money right now will make a big difference. Here are a few tips to help you handle your hard-earned money better:
1. Create a savings account
Although it seems kind of basic, savings accounts are essential to being financially secure. This money can be used in emergency situations to help ensure your safety in unknown circumstances. All you have to do is take 50-75% of your paycheck and put it in your savings account. The rest of the money can go in your checking account. Further down the road, you could also use either a high yield savings or a CD account(higher interest rates).
2. Invest in an index fund
Index funds are investment funds that follow a specific index, such as the S&P 500, and when you put money into an index fund, that money is used to invest in all the companies contained in the index. This is a relatively safe way to get started in long-term investing because if one stock falls, you still have a lot of other companies you’re invested in, so your whole portfolio won’t take that much of a hit. Warren Buffet, sixth richest person in the world currently, recommends index funds as a great way to save up for retirement.
3. Invest in a retirement plan
Retirement plans, such as a 401(k), can help you put money aside for retirement and enjoy tax advantages. Experts recommend investing fifteen percent of your pretax income in a retirement plan. This will decrease your taxable income and you won’t get taxed until you withdraw money from the plan(typically when you retire). Some employers might even match your contributions to the retirement plan which makes investing in these plans an even better option for you.
4. Stick to a budget
Create a budget based off your monthly income and spending and make sure you adhere to it. There are lots of apps and tools online to help you create a budget, so sticking to the budget will probably be the hardest part. If you adhere to a budget, this will help you minimize unnecessary purchases and make you think before making any big purchases.There are many financial tips out there, but these four tips are a good starting point for either teenagers getting their first job or adults with full time jobs. So the next time you get a job and get your paycheck, just remember to be smart with your money and don’t blow it all away immediately.
Sources:
https://www.experian.com/blogs/ask-experian/tips-for-financial-success/