Managing your finances doesn't have to be a scary thing, in fact, it often serves as a way to identify trouble spots and achieve your goals. To help you become financially empowered so you can conquer your financial goals to live the best version of you, I've put together 20 money (and life) tips. As part of my role as an Experian Boost™† Ambassador and my personal commitment to financial literacy education, I'm giving away a copy of my new book, "The Wealth Cure: Putting Money in Its Place."
Learn more about how to enter the social media contest to win a copy! Make sure to engage with me throughout the holidays as you do your end-of-year financial planning on Twitter at @HillHarper and let me know what you think of these tips—or what tips YOU have that you want to share with others.
1. Create a Financial Blueprint
It is important to examine your priorities and determine how much money you require to meet your basic needs. From there, you should assess what else makes you happy and how money can help you achieve your goals. This assessment will help you create a blueprint that identifies your goals around money, spending, saving and investing.
2. Pay Yourself First
One of the core pillars of your financial blueprint should be to pay yourself first. Each month, before you spend on anything or anyone else make sure you are automatically putting money into a few buckets that help to build your savings: An interest-earning savings account, an emergency fund, mutual fund investment account and health insurance.
3. Know the Difference Between ‘Needs' and ‘Wants'
We must always take care of our needs first, but we often run into trouble when we mistake a "want" for a "need." For example, saving for retirement is a need, but saving for a designer accessory is a want. Be mindful that a need will sustain us long term while a want brings temporary satisfaction.
4. Never Go into Debt for a Want
Paying for a want with a credit card is a mistake many of us have made. Interest costs adds up each month the balance is not paid in full. Stay disciplined and only pay cash or debit for a want (after you have taken care of your needs). Going into debt for a want is a big no-no.
5. Bet on Yourself
In a world with endless investment opportunities, the best single investment you can make is in yourself. Invest in your goals and dreams—you need to incorporate both into your blueprint or plan for your life (see No. 1).
6. Assess the Cost of Being You
How high is the cost of being you? I always say, "You can't be free if the cost of being you is too high." If your expenses or debt outpace your income then it is very difficult to live the best version of your life. Most of us feel like we are continuously playing catch-up financially. Keep track of what you spend and you will soon discover new ways to reduce your monthly expenses and apply those savings towards self-investment.
7. Understand Smart Money vs. Dumb Money
Contrary to popular belief, not all dollars hold the same value to us. Knowing the difference between "smart" and "dumb" money is one of the keys to building a solid financial foundation. Dumb money is spending on things like credit card interest, or things that lose their value quickly. Smart money, on the other hand, helps you increase your value and invest in yourself, like paying for an education or a home. Smart money is spending on things that pay you interest or dividends rather than the other way around.
8. Avoid the Debt Trap
There is debt that allows us to live the life we want, such as being a homeowner or launching a business. But other types of debt, such as credit card debt for unnecessary purchases, is not what you want to have. Be mindful of what you purchase and only buy what you can truly afford.
9. Control Your Credit Score
Make sure to check your credit score. A good credit score can help you gain access to capital with better terms at affordable rates. To improve your credit score, pay your bills on time and use a resource like Experian Boost. It's a free online tool that allows you to add positive payment history from utility and telecom bills to your Experian credit file, which can increase your score instantly.
10. Use Money as a Tool
Just as a hammer, when used properly, can help you build something. A hammer can also be used to tear things down. Money is similar. When used effectively, money, debt and investing can help you build the life you want. But when used improperly, like running up high-interest credit card debt, the way you use money can actually push you further away from your goals. Use money to build, not tear down.
11. Build an Emergency Fund
We can never predict unforeseen events, but we can prepare for them. I recommend holding at least four to six months of savings set aside in an emergency fund. In the event of job loss, catastrophic medical events, needed car repairs, large appliance purchases or major home repairs, an emergency fund means you'll be prepared. Not only does it provide peace of mind, it helps prevent you from going into debt when an emergency arises.
12. Auto-Invest in a Mutual Fund
One of the most powerful money growth tools is allowing compounding interest and the time value of money to work on your behalf. I set up an automatic investment that every month takes an amount that feels like a stretch but that I can afford from my bank account and puts it toward a low-cost index mutual fund like Vanguard 500. This is called dollar-cost averaging. And be sure to automatically reinvest the dividends. This will allow the investment to grow over time.
13. Open a 529 Account for Your Children
A 529 account is a tax-advantaged investment vehicle and is a way to save for your children's future education needs. A 529 plan allows the savings to grow tax-free as your kids age. Additionally, recent law changes also allow parents to use 529 money for high school as well as college.
14. Have Health Insurance
If you are self-employed or work for a job that doesn't offer health insurance, you must take it upon yourself to find adequate health insurance. Medical bills are the No. 1 reason people file for bankruptcy in this country. Don't risk your financial health with overwhelming medical debt.
15. Consider Life Insurance & Retirement Savings
People are living longer these days and there is good reason to believe we'll continue to live longer and longer. One of the worst things we can do is to "outlive our money." Maxing out your retirement savings options, whether it's an individual retirement account, 401(k) or pension, is always the right thing to do. It often offers significant tax advantages and allows your money to more efficiently grow over time. I am also a proponent of whole life insurance policies (and in some cases term life) as a part of an overall diversified plan. The costs tends to be front-loaded and are conservative investments, but offer a peace of mind benefit for you and your family that for some is priceless.
16. Remind Yourself You Are Worthy
Constantly remind yourself consciously and subconsciously that you are worthy of having and abundant life and a positive relationship with money. You deserve to be unreasonably happy and a part of that is having a positive attitude about money and life. You are the active architect of your own life and you deserve to build a great one—a life of abundance filled with love, beautiful experiences, joy, health and the wonderful resource of money!
17. Talk About Money
It is very important to actively seek out money mentors and even put together your own personal board of advisors. In many ways, money is a taboo subject. A study recently showed that people more easily discuss infidelity than their income, savings and debt. Being able to talk about money with family members, friends and colleagues is important as you manage your money and blueprint. In most communities there are organizations that offer free financial literacy seminars that highlight one or more aspects of building a solid financial foundation, take advantage of those. Also, speaking with and even working with a financial professional is extremely helpful as well. Don't feel like you have to do all of this on your own. The more you talk about money the more you realize money itself holds no power, but the power is in the plan and the plan is for you to have a happy abundant life!
18. Remember: You Are Not Your Credit Score or Account Balance
Our society is very quick to attach value to the size of one's bank account or even credit score. Those numbers are not you. They are just numbers. Numbers that you can influence and change with sticking to a plan and your actions and behaviors. Be positive and inspired: If you have credit card debt, a challenged credit score or very little savings, you have the power and agency to change all of those things and you will!
19. Be Patient with Your Money
When it comes to long-term savings and investing it is crucial to be patient with your money and be patient with yourself. Put your plan in place, modify it when necessary, but give it time to work. Regular savings can add up quickly, but impatient spending can make it go away just as quickly. I avoid constantly looking at my account balance and stock prices. Put the money in and let the time value of money do its work. Your money blueprint should cause you less stress not more. So be patient.
20. New Year, New You
With 2020 we are starting a new decade and what better opportunity is there to do a complete financial makeover. Right now interest rates are still at historic lows. That means borrowing money is less costly. If owning real estate is a part of your blueprint and you have identified a well-priced home or cash flow-positive investment property, this is not a bad time to buy. However, you must be certain that if there is a pullback in real estate, it is not so costly that you would be forced to sell it in a downturn. Selling stocks and real estate in down markets can take years to recover from. No one has a crystal ball, but given lower unemployment rates and low interest rates, 2020 could be a good year to have a plan for growth. A diversified portfolio for this next decade is a good portfolio.