Written by CHUMA
Recently, a friend of mine asked me for financial advice on how to manage his money because he always regarded me as someone who stayed financially on track. So I imparted to him the 10 tips that I have been using throughout the years, which can help you as well.
1. Open a savings account at ING Direct. Traditional savings accounts at regular banks only yield less than or around 1% interest. But ING offers an annual percentage yield of 4.30%.
2. Figure out a budget based upon your living expenses and bills that need to be paid. No matter what amount they come to, always create a budget where you pay yourself a substantial amount to your savings account first as if that account is a bill....and think of the money as gone.
3. If you are a full time employee eligible for a 401K account, please do not hesitate to open one and try to max out on the pre-tax contributions if you can. If you can't, contribute at least 10% of your salary.
4. I suggest opening a Roth IRA over a Traditional IRA. You can read here to review the differences and compare them. The bottom line is that you need to start contributing to a pension plan or some sort of retirement nest egg so that you won't be eating dog food when you are an old person.
5. Even though the real estate market isn't as good as it was when I bought my new house, I always encourage people to buy property. It fosters security in a cruel world of expensive rents, and in the long run is a great financial investment that will most likely accrue equity with time.
6. If you like to travel, open a separate account where you can save money solely for travel. You decide how much should be applied to it annually, but this amount should never exceed your primary savings account, as your primary account is your liquid security in the event an emergency arises or you are just really in need of something important.
7. Spend less than you earn. Wealth is not determined by how much you make, but by how much you keep and grow. Also, value your time. Your life is now; time is money. Don't waste a moment.
8. Be strategic. Talk with money-savvy people about asset building. Cut out idle chatter and mindless TV and use that time to read about building wealth. I suggest subscribing to Black Enterprise Magazine and Kiplinger Personal Finance Magazine.
9. Hire yourself. Even if you have a regular job, consider starting some sort of business....or perhaps create your lifestyle and a business around your passion, and work will never again feel like labor.
10. Consider starting a savings bond account at Treasury Direct. The advantage of saving monthly into savings bonds is that once you contribute the money, you are not allowed to touch it for a year, which promotes discipline at building wealth.