5 Tips To Manage Your Money Like A Pro

Personal finance is a topic that can be daunting for many people. However, it is important to have a good understanding of personal finance in order to achieve financial success. Here are five tips for better personal finance along with ways we’ve implemented these tips. 

  1. Create a budget and stick to it. One of the most important things you can do for your personal finances is to create a budget and stick to it. A budget will help you track your income and expenses, and it will help you make sure that you are not spending more money than you earn.

What we do: We track our spending every month. Mr. Vine is the master of spreadsheets. We resist “traditional” budgeting, though. Recently, we filled out Ramit Sethi’s Conscious Spending Plan. We learned that we invest much more of our income than his plan recommends, while our fixed expenses and “guilt-free spending” are considerably below his guidelines. With years of historical spending data, we are now working towards a more proactive approach. The goal is to tell our money where to go, rather than waiting to see what happens each month. 

  1. Pay off your debt. If you have any debt, such as credit card debt or student loans, it is important to make a plan to pay it off as quickly as possible. The longer you wait to pay off your debt, the more interest you will accrue.

What we do: We have long been very debt-averse. Our rules include paying off credit cards every month ($0 consumer/credit card debt). We’ve both paid off relatively modest student loans that we were lucky to consolidate back in the days of sub-2% interest rates. We just completed our fastest auto loan payoff yet (~60 days), and prior to this purchase, we bought our last two vehicles on 0%, 36 month loan terms. It is amazing not to have a car payment! We have 15 year mortgages on each of the respective properties we own, with interest rates around 3%. The mortgages are our only current debt. The rental income on that property cover its fixed costs–mortgage, property tax and condo dues. Our other mortgage payment is less than a car payment for most people.  

  1. Invest for the future. It is never too early to start investing for the future. Even if you can only invest a small amount of money each month, it will add up over time. There are many different investment options available, so you can choose one that fits your risk tolerance and financial goals.

What we do: If I could give my past self any financial advice, it would be to invest sooner, and to invest more. When I first started working after college, I believed “maxing out” a 401(k) meant contributing just enough to get the maximum match. Contributing the annual IRS maximum felt impossible back then. We now invest about half of our income and live off the rest. 

  1. Save for retirement. Retirement may seem like a long way off, but it is never too early to start saving. The sooner you start saving, the more time your money has to grow. There are many different retirement savings options available, so you can choose one that fits your needs.

What we do: Our investment strategy is comprehensive and certainly includes retirement plans. We also want to be prepared for likely early retirement, so our strategy includes special accommodations for this like a taxable brokerage account and a health savings account to cover pre-Medicare / post employer healthcare costs.  

  1. Insure yourself. There are many different types of insurance available, such as health insurance, life insurance, and car insurance. It is important to have the right insurance coverage to protect yourself and your family from financial loss.

What we do: We tend to be pro-self insurance when it makes sense. For us, that means we self insure when first of all, it is legal to do so and secondly, when we can predict or control the cost of the risk we are insuring against. Insurance premiums can be costly and may serve to enrich the insurance company without offering significant benefits to the insured. As one example, we don’t carry any additional life insurance beyond what our employers provide. Our dependent situation coupled with our respective incomes and current net worth means that either of us would be financially fine if one of us were to die. By contrast, we have an umbrella liability policy for our home-owner’s and auto insurance policies. This coverage comes at an additional premium. Liability is something we can’t control or predict. It’s possible for an accident to occur at one of our homes or in a vehicle leaving our assets at risk. 

Following these tips can help you achieve financial success. Remember, the most important thing is to start taking action today. The sooner you start, the better off you will be in the long run.

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