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Three Financial Truths you need to Know Now

3 February 2015 No Comment

PrintYour financial health directly impacts your quality of life. Taking charge of your finances will give you more freedom and less stress. If you are struggling with your money or you are just starting out on your own, there are a few things you need to know now that will change the way you look at money.

Enjoy these great tips by LowIncomeFinancialHelp.com, getting on top of your finances is easy with the right resource and mind set.

Your kids learn their money habits from you

Most schools don’t offer a course in financial planning, which means you have a bit of work to do if you want your kids to be money wise when they grow up. If you spend a lot of money on credit cards and struggle to pay your bills every month, your children are more likely to have debt issues when they are on their own.

You can offset this risk by taking time to teach your children about money. Like the birds and the bees, money topics can and should be tailored to the age and maturity of your children. Common topics you should cover with your kids include saving a portion of their money, creating a budget and investing in a retirement plan. If you need more ideas for teaching your kids, the Australian Securities and Investment Commission has a program that can help you teach your kids about money.

Spend less than you make

The only way you can save money and become financially stable is to spend less money than you make. This isn’t always easy and it will take sacrifice, but if you are willing to make the sacrifice for a little while, you’ll be better for it.

The only way you’ll know your true bottom line is with a budget. Create a budget and make sure every dollar has a purpose. Any money left after budgeted expenses (you can budget your entertainment in) should go towards savings or investment. If you constantly spend more than you make, you’ll be playing catch up all the time.

Credit cards are not your friend

Even though credit card companies would like you to think otherwise, credit cards are not essential for building credit. If you want to purchase a home and you feel like you need to build your credit, opt for an auto loan. You’ll get much lower interest rates and you cannot keep adding to the debt. With credit card rate averages sitting just under 15 percent, you’ll be far better off paying with cash.

Let’s say you charge $2000 on a credit card with 15 percent interest. Let’s say you don’t pay anything. Your new balance is now $2300. The next month, the interest rate is based off your new balance. So you are charged 15 percent interest on the $2300. It adds up fast. Skip the cards and only buy what you can afford.

Some people will argue that credit cards aren’t harmful if you pay your balance off every month, which is partially true. If you pay your credit cards off every month, you won’t have to worry about interest rates. But, what happens if you run into an emergency and you find that it’s easier to just pay the minimum payment or skip a payment entirely? Credit cards are not a feasible option for most people. Choose a safer option and reduce your risk of debt.

 

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