Financial independence is an important long term goal for the majority of the population. With all of the information out there, it can be hard to determine the good advice from the bad. While everyone may seem to have different opinions about where your money should go and the best ways to spend it, being financially successful comes down to a few truths and some lies.Truth #1: You Must Pay Yourself, First- Saving money is just as important as spending it on necessities. Each pay check, you need to make paying yourself a priority. Putting an amount of money away into savings should be done first and foremost, even before focusing on paying bills. Focusing on building savings by first dedicating a small amount, and then increasing it over time is a surefire way to create wealth over time. Being consistent with this is truthfully the only way to make progress on your long term financial goals.
Truth #2: Wants and Needs are Very Different- Necessities in life are very few- food, shelter and clothing. When making financial decisions you have to recognize that your budget should only fit what you really need, and you should save money by cutting down on wants. Asking yourself about a purchase before you make it is the best way to cut back on spending and weigh your options each time you are going to buy something. Stop and think about whether or not the purchase is a need or want, and if you can get the item for cheaper somewhere else before you buy it.
Truth #3: Budgeting is Key- You hear it over and over again, but the truth is that a budget is a major factor in financial stability. Creating a budget does not have to be a difficult task, but it does need to be practical. Your budget not only has to accurately track your spending habits and monthly expenses, but also show you where you need to tighten up so you can attain your financial goals. In reality, having and sticking to a budget is the best way to stay on top of your finances and help know where your money is going.
Truth #4: Spend Less Than You Earn- The easiest and most straightforward financial truth to always remember, is to spend less than you earn. Although quite obvious, a lot of people become financial strapped and get into debt because they don’t follow this piece of advice. The only way to progress toward your financial goals and advance in your money situation, is to simply spend less than you earn.
Lie: “I Don’t Need an Emergency Fund”- Too many people don’t realize the importance of having an emergency fund. Some believe it is for those who live negatively or in fear, but the truth is that you will inevitably run into unexpected expenses. If you suddenly find yourself in a situation where you need to come up with a good amount of cash and don’t have it, you will have to borrow the money from somewhere else. Putting money away into an emergency fund is a vital financial move that everyone needs to make.