A bit of advice from our dear friends fromÂ Certinvest:
Another year has passed and youâ€™re now planning your objectives for 2016: maybe you want to change the furniture in your house, or take a nice trip to Thailand, or just change your car with a more efficient one in terms of fuel consumption. None of these will become reality without proper money management.
Hereâ€™s how to do it:
- Manage your debt
If you donâ€™t have debt up until now, congratulations! And make sure you donâ€™t fall into it! However, debt at this time is not the worst, as interest rates are low, so the installments youâ€™ll pay are quite affordable. But be advised that low interest rates will not remain low for long, so if you need to go into debt, make sure itâ€™s for a short period, and that you truly need it.
- Create a back-up fund
At some point, you will need money urgently: either your car breaks down, or you lose your job, or in happy cases, many of your friends will get married during the same summer. In all of these, you budget will be seriously affected, so be prepared. Save fist, spend later â€“ that is the trick!
When you get your paycheck, put some money aside (about 10% of your salary), and then, go on with your life with the money you have left. You will see that changing your habits will make you more financially aware and prepared for an emergency situation.
- Build a strong bank history
Even if you donâ€™t consider it now, you will get a mortgage loan at some point. When you apply for a loan, the bank will check your credit history, so itâ€™s better if you build it soundly in advance. What you need to do: make sure you pay all your bills or installments on time. Itâ€™s as simple as that. That way, your credit score will be clean, and when you will decide to apply for a loan, you will qualify with flying colors.
- Start saving for when you retire
You may think that being retired is a long way from here, and youâ€™re probably right. But if you start to save money today for your future pension, you will need to set aside a lot less money than if you start to save for your pension a few years before you retire. Even 15 euro a month can do the trick. In 30 years, setting aside 15 euro a month, at an average 5% annual return will amount to more than 12 000 euro. Not too bad for a few coffees worth of money, right?
Building sound financial habits is key to building the life you want. Carefully planning your expenses, managing your debt and paying yourself first by saving will get you where you want to be financially.