5 Ways to Stay Smart with Your Money

Money managing skills are not innate for most people. For some people, it even takes several
serious financial crises for them to really learn smart spending, saving, and investing practices.
But it doesn’t have to be that way.

Being wise with your money is more about self-control than anything else. Yes, there are some
traps to avoid, but for the most part, staying financially stable requires nothing more than the
ability to limit yourself and behave in a disciplined way with money. Still, this is not an easy
thing for a lot of people—especially young adults or teenagers—to do, if only because they don’t
know where to start.

Well, for those people that don’t want to have a crisis in the first place (or for those who want to
avoid a second or third one), the five following tips should be a good place to start.

1. Keep your credit card debt low. Credit cards in and of themselves are not evil or
dangerous. What is dangerous is the careless manner in which many people use credit
cards. When buying with credit, try to think of it as money that you don’t actually have.
Just because your credit limit is $2,500 doesn’t mean that you really have $2,500 to
spend wherever you want. You have to pay off your credit card because it is money you
are borrowing from a bank. The simple rule is: if you don’t have the money your bank
account, don’t spend it with a credit card. If this is difficult for you, try only paying in
cash for a month to impose a physical limit on your spending.

2. Start saving early. Investing your money in funds is a good way to prepare for the
future, and keep you from living in squalor after your retire, but if you choose to invest,
do it as early as you can. A 20 year-old investing $100 a month at a 10% interest rate
until he was 60, for example, could save at least $500,000 more than a 30 year-old
following the same strategy. Furthermore, have your investment money automatically
withdrawn from your account each month, so that you don’t spend so much that you
aren’t making a worthwhile investment. In other words, budget around your investment.

3. Don’t waste a 401(k) with a company match. Especially in these times, a 401(k) with
a company match is an uncommon thing, so if your company offers one, make sure to put
up as much as you can afford. This is as close as you’ll ever come to getting something
for nothing.

4. Be prepared for personal injury or damage to your possessions by insuring yourself
as fully as you can. Sometimes it makes more sense to remain uninsured, but for the
most part, you don’t want to risk the chance of something happening while you don’t have
enough money to pay for injuries or damages. These fees and expenses will compound
faster than you would believe, and can leave you financially crippled. Insuring yourself
is thinking for the long term.

5. Take out as little loan money as possible, and avoid co-signing loans. Obviously
there will be exceptions to this rule (if you are a student, or if you are a parent, for
example) but generally you want to pay as much of your own was as you can, and should
think very seriously before co-signing a loan. If someone needs you to co-sign, it’s
because banks don’t trust them by themselves, so if they don’t (or can’t) pay, that debt
comes to you.

It is certainly easier said than done with some of these tips, but if you start doing your best to
adhere to these guidelines as rules, and only break them when you absolutely must, you’ll start to
find yourself not only stable, but prospering.

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