Personal Finance: Sound Financial Habits to Start Now

“I just got my taxes back, time to go on vacation!” I can’t tell you how many times I’ve heard about growing up and now see it daily on social media. I realized early in my life that the way I managed money was very different from most people I know. It always baffled me because I didn’t quite understand how people could spend money without thinking about saving or retirement. Here are some key habits you can start now to help secure your financial security in the future:

1. Saving for retirement as soon as possible is the most beneficial thing you can do. Even if it’s only $50 a month, which is the minimum for most plans, you can be setting yourself up for thousands and thousands of dollars in retirement. The earlier the better. For example, a 25-year-old who saves $200 per month until age 65 and earns exactly 6% of the money saved annually would have made about $400,000. But if the 40-year-old had contributed the same amount each month at the same earnings rate, he would have collected only $139,600 by the time he reached the age of 65.

2. Don’t carry a credit card balance with an interest rate. This is one of the quickest ways to build up an amount of debt that can weigh you down for the rest of your life. When you need to use credit and can’t pay in full each month, look for a 0% interest card. Many promotions start from six moths up to a year or more. If used responsibly, it’s basically a free loan. Just make sure you pay his balance in full before the end of the term or you’ll wind up with a backhand interest that can add hundreds of dollars (if not more) to your obligation.

3. Instead of buying a new car or a lease, try to save and buy a good used car for the money. What you save between interest, depreciation, taxes, plates, and insurance will save you thousands. According to, buying a two-year-old is your best bet because you avoid the biggest drop in depreciation. Owning it for three years and then selling will also benefit you because you see another big drop after year five due to the long-term maintenance generally required at that point. If you can’t afford a two-year-old without having to take out a loan, getting a slightly older car with long-term maintenance repairs (and low miles if possible) is your best bet.

4. Avoid eating out if you can. The average American who eats 4 to 5 times a week spends an average of $232 a month or about $2,700 a year. If you skip eating out for two years, you’ll already save enough to buy a good used car like the third point above.

5. The last thing, and arguably the most important thing, is to think long term. The worst way to justify spending is to do it on an individual basis versus a monthly or yearly total. Take eating out for example: while it may only cost you $10 a meal, don’t fail to consider that if you did it three times a week for a year, you would have spent over $1,400. This same logic can be applied to just about anything – clothes, vacations, furniture, coffee, express shipping, and so on. Anytime you’re about to spend money, think to yourself, well, how much is this going to cost me each year.

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