Everyone knows that saving money is a good idea, but it can be tricky when juggling expenses, debt and those unforeseen circumstances. Creating good habits when it comes to managing your money can make all the difference in achieving balance between becoming debt free and investing for the future.
- Create an emergency fund
The recent months have made it more apparent and illustrated how important it is to build an emergency fund. Ideally this fund should be around three months’ living expenses and accessible for those rainy days.
2. Manage your debt
Working towards paying off your store cards and credit cards can have a huge impact. This will help free up money each month which you can then use towards paying off other bigger debts like a personal loan. If you spend on your credit card during the month, settle the month’s expenses when you get paid. Just remember to close these store accounts or reduce your credit limits as you pay them off.
- Start a tax-free investment
This is the most powerful investment tool as you will not pay any tax on interest, capital gains or dividends. Start as soon as you can and continue to add to your investment regularly to see the power of compounding at work.
- Start allocating towards retirement
Whether retirement is far into the future or just around the corner, use the time to your advantage, even if the amount is small while you are initially focusing on clearing your shorter-term debt. Increase your contributions once you have paid off your more pressing debts.
- Diversify, diversify, diversify
It’s so important to have a good mix of investments in order to mitigate risk. Because we don’t know what will happen next, choose investments that give you exposure to a mixture of assets, investment styles and geographies.
With just a few good investment habits, you will be well on your way to growing your wealth. Remember, before you invest, to always do your homework. Research investment options and talk to a financial planner who can help you choose investments that best suit your financial situation and needs.