5 Keys To Financial Success: Personal finance and budgeting do not have to be difficult and taboo subjects. You will be on the road to financial success if you do simple things. If you’re not sure where to begin, here are five keys to getting you in shape:
Key 1: Create a one-year emergency fund to cover your expenses, bills, and way of life for an entire year. You can put these funds in a conservative investment account to ensure that you don’t lose money, making you less likely to suffer losses.
An emergency fund allows you to:
- Take time off if you want to.
- Coverage for medical emergencies.
- If you lose your current job, don’t feel rushed to find a new one.
Key 2: Don’t get a credit card if it will tempt you to spend more than you can afford. If you are a responsible credit card user, use it wisely; each credit card purchase should have a purpose.
Before you use a credit card, ask yourself, “Can I afford to pay for this in cash right now?” Credit card interest rates are exorbitantly high.
If you buy something for $1,000, you may end up spending twice or three times that amount due to interest and only making the minimum payments.
Key 3: Avoid debt at all costs. The three types of debt to avoid are as follows:
- Loans for students (debatable)
- Debt on credit cards
- Personal loans
Student loans are fine if you’re absolutely certain you’ll have no trouble repaying them, but many people take out loans for degrees that won’t allow them to pay them off anytime soon.
Key 4: Never stop saving and investing. Whatever you do, save and invest about 10–25 percent of your total income. Determine how much you need to save per year, month, week, or day if you want to save a certain amount of money by a certain age. Always be prepared to lose your job, your income, or both.
Key 5: Never rely solely on one source of income. As I always say, having only one source of income is like betting your entire life savings on one sick horse.
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Multiple income sources give you options:
- Alternatives for reducing your debt faster.
- Options for achieving the lifestyle you desire.
- Options for quitting your job or dealing with a job loss
- Options for putting more money into your future.
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5 Keys To Financial Success
- Create a one-year emergency fund
- Don’t get a credit card
- Avoid debt at all costs
- Never stop saving and investing
- Never rely solely on one source of income
This article is solely for educational purposes. It is not intended to be used as financial or legal advice. Not all of the information will be correct. Before making any major financial decisions, seek advice from a financial specialist.