Frugal Living

Financial Lessons To Learn As You Get Older

As you get older, money and finances are something that you have to get a grip on. Bad habits and overspending can become a problem when you’re trying to plan your life. 

Some people seem to be naturally very good with their money, others always seem to be making poor choices. But for most, managing your money is something that you get better at over time. 

It’s never too early to plan 

You may feel like you’ll live forever when you’re in your 20s. Retirement is so far away, there’s no point in thinking about it. The truth is, that the sooner you start saving money the better your retirement will be. Plus, if you’re aiming for a particular figure at retirement, you won’t have to plow as much money into your pension and savings in your later years. 

The same goes for planning your finances for when you’re no longer around.  Life insurance and final expense insurance are both something to think about, especially if you have family or other people you might want to leave money to. 

Expensive isn’t always the best

Unless you have an unlimited budget, then you are going to have to learn to live within your means. If you’re someone who is into buying big brands for everything then you’re soon going to be building up the dept. 

It’s time to get out of the habit of thinking that brands equal quality. It’s not always the case. Yes, some products will be superior but others will be no better than unbranded items and just have clever marketing campaigns. Don’t be afraid to seek out lower price products. 

But neither is cheap

At the other end of the spectrum, don’t try and go for the cheapest deals possible at the expense of quality. You know what they say ‘buy cheap, buy twice’. 

Being frugal is great for your bank balance but don’t always seek out the cheapest price. For example, if you’re looking for insurance, you might be tempted to go for the policy with the lowest monthly premiums. But what if the policy didn’t cover you for some essential issues. Those few bucks a month you saved could end up costing you a lot of money in the long run. 

How to create and stick to a budget

Having a budget might sound boring but is important to keep your spending in control on a consistent basis. There are lots of great budgeting tools available on apps and some bank accounts have these built-in

Create a budget that is realistic and then keep on top of your spending. You might feel a bit restricted for the first few months but after that, the satisfaction of being able to control your spending habits will actually motivate you to keep going. 

This type of budgeting is good if you’re an impulse purchaser or just end up frittering your money away on little purchases here and there. 

Not blowing your salary straight away

In addition to controlling your living costs, you need to get into the habit of not spending your money as soon as you get it. Being paid is not an excuse to blow your money straight away and then have to do without or use credit for the rest of the month. 

Save a percentage of your pay every month into a savings account. Learn to live off a smaller proportion of your paycheck. Once you get used to this, it will be easier to reign in your spending. 

That emotion can affect your finances 

You shouldn’t go shopping on an empty stomach and you shouldn’t make financial decisions when you’re emotional. Impulse buying and unnecessary purchases can have a huge effect on your finances. Don’t make big decisions if you’re upset or angry.

To buy a house you can afford

We all dream of living in large, beautiful properties like the ones we see on TV or online. But for the majority of us, they are out of reach. When it comes to buying your property, take time to really think about what it is you’re looking for. Overextending yourself on a mortgage can really affect your ability to save throughout your life. 

Many realtors recommend that when you’re trying to stretch a budget, you should go for the ‘worst house on the best street’. This doesn’t mean you’re looking for a run-down home, it means that the location and area are more important. Property can be improved over time with renovations and decorating, but there is little you can do to make the area you live in more desirable or the schools better for your kids.  

Not to bury your head in the sand 

The best way to get your finances on track as you get older is to confront them head-on. You should sit down and think about what you want to do with your life and how that needs to be planned for financially. This could be relocating to another country, undertaking a period of further education, or saving up for a house and starting a family. 

Even if you’ve just started out on a career, sit down with a financial advisor so that they can give you some advice on the best way to go about saving for your goals. 

If you’re in debt, rather than making things worse by trying to ignore it, you need to sit down and list all of your debts and make a plan on how to pay them off. 

Even if your credit is manageable right now, the pandemic has shown that people’s circumstances can change very quickly. Look at all of the debt you have that isn’t a mortgage and create a plan to start paying it off. Avoid getting any more debt. 

There are lots of debt strategies out there. You can pay your minimum amounts off each month and then put any extra money towards the smallest debt. 

Other methods involve paying off the debt with the highest interest rate first and then moving on to the next. There are pros and cons to each. Many people find that paying off a small debt, motivates them to start paying off the rest. 

That your need a rainy day fund

There are so many things that can happen in life which can severely impact your finances. A break-up, job loss, unplanned repairs. All of these things can take you by surprise. If you don’t have the money to pay for them, you could end up in a tricky situation.

Just think of how the COVID-19 pandemic took everyone by surprise, and many people lost their jobs or had to take a pay cut. Some people are still in this situation over a year later. 

Before you start saving up for other things, create an emergency fund that has the equivalent of 3-6 months of living expenses in it. Once the money is in there, don’t touch it. Add to it if you can but leave it in place so that you have a fallback should something happen. 

Ideally, this is money you’ll never use but having it and never needing it is better than needing it and not having it. 

Not to fall for get rich quick schemes

Unfortunately, there are a lot of people around who will try and convince your that they have the answers to getting rich quickly. Tempting as it might be, these are just sophisticated scams designed to part you from your money. 

Usually, if something sounds too good to be true, then it probably is. Earning money takes effort and planning. Don’t put your hard-earned cash into someone else’s pocket. 

Some of these schemes are very clever and not technically illegal (such as MLMs) so you may not realize what’s happening. Always do thorough research on anything that you are thinking of getting involved in. 

To protect yourself and your loved ones

It’s good financial planning to ensure that you, your family, and your assets are protected. There are many types of insurance you’re going to need. This includes health insurance, life insurance, income protection, and property insurance. 

It can be tempting to save a little money by skipping these but if the time comes that they are needed, you’ll regret not having them. If you have a family or other dependents, how would they cope financially if you were no longer around? 

Try talking to an insurance broker if you need multiple policies. They can often get preferential rates for you and make the process a lot simpler. 

That money isn’t everything

Money is important, but it isn’t everything. If the pandemic has taught us anything it’s that other areas of our lives should take precedence. Try to stop yourself obsessing over money and instead develop a healthy relationship with it and good financial habits. Most people will have ups and downs when it comes to money in the course of their lifetime. 

Conclusion

Your relationship with money will change throughout your lifetime. As you mature you should be able to develop better habits that let you achieve your financial goals. 

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