Simple Financial Tips
April 27, 2016
There are many ways to save and properly spend your money. At Compton Accounting it is our job to help you use your money wisely. I found some helpful tips to help you get the most out of your paycheck.
Now if you are just starting out on your own it is important to start saving for your retirement sooner rather than later. I know most of us think that when you’re 25 retirement should be the farthest thing from your mind. However this is not the case. If your job offers a 401k plan, sign up at your first opportunity. Now if your job doesn’t offer a 401k plan you can place some of your money into an IRA. Naturally the more you earn, the more you can stash. Stock away at least 7% (if you can) of your earnings in the beginning, and increase it each year until you’re diverting 15% a year.
After you have set up your 401 K plan your next step is place a value on money. Money doesn’t buy happiness but it does buy you comfort. Just understand what it’s worth. What I mean is money is what you earn in exchange for your time in some productive pursuit. For example you earn $15 an hour at your job, and you are considering buying a new TV for $800. You may calculate that you spend 53 hours, or about 7 days earning that money. Keep in mind this is a rough estimate depending on your area and taxes. So next time you make a purchase do some quick calculations in your head to determine if whatever you are buying is worth it.
Credit cards can be a wonderful thing, or they can be a terrible thing depending on how you use them. Our advice when you use a credit card is use them sparingly, and if you are going to use them spend an appropriate amount that you can pay off quickly. Credit cards have an interest rate and some are much higher than others. We know how easy it is to pay for things with plastic but don’t fall into the trap of interest rates.
Next be prepared for the unexpected. At some point you might lose your job through no fault of your own. Prepare today by stashing money in an accessible emergency fund. The easiest way to do this is to put some of your money in a savings account. We do advise that you try not to use that 401 k money for emergencies. It will cost you plenty, between income and penalty taxes. So before you make any kind of decision to take money out of a 401k please talk to an advisor first.
Finally, be thankful for your good fortune. It’s not all about money, you will have abundance through strong family ties and solid relationships. Take some time out each day to reflect on the good in your life. Spend at least 1 day a week in some sort of activity you like to do. Then take a minimum of 1 week vacation annually if you possibly can so you can totally unplug and unwind.
I hope some if not all of this has been helpful. If you have any questions please call Compton Accounting at 309-484-8888. We will help you in any way that we can.