11 quick financial tips that will change your life? Really? Yes. Absolutely. After 5 years of blogging about personal finance and doing my best to live exactly what I preach, I consider these 11 quick financial tips to be my master index card that I carry with me each day.
11 Quick Financial Tips That Will Change Your Life
On this site, some of the quick financial tips are small, some are mediocre, and some are large. In this post, all of these quick financial tips are large and important. Without wasting any time, let’s jump into them so you can make them part of your daily life immediately.
New cars depreciate in value so rapidly that you often lose 60% of what you paid after just four years! Spend $30,000 on a brand new car and it’ll only be worth $12,000 a handful of years later. That’s a loss of $18,000!! This is the main reason why I never buy new.
I also encourage people to pay cash for their cars, not because it’s overly expensive to pay the interest, but because I never like to see people overextend themselves beyond what they can actually afford. Once you start buying vehicles with future money, it’s way easier to upgrade and spend far more than you really wanted to in the first place.
2) Contribute at least 15% to your future
This is the absolute minimum. Many financial advisors recommend that you stash away 10% of your salary into investment accounts, but depending on the market, this could actually leave you with less than you need in your retirement years – especially if you need long term care in your old age. Liz and I make a point to stash away much more than 15% for our retirement – actually, we save over 50% of our income, but that’s a different story for another day.
3) Diversify your investments
I’m not a big fan of putting all your money into the stock market. To me, this isn’t diversification. If you really want your money to be secure while it’s growing, look into other areas of investments like:
- real estate
- your own business
By having multiple sources of investments, your chances of losing a large portion of it go down dramatically. If you want to avoid losing your money before you retire, I suggest following the quick financial tips of spreading it around to multiple investment sources.
This is one of the quick financial tips that people almost always agree with, but never actually do. Why is that? Mainly…because it’s boring.
With all that cash sitting in one account, think of what you could buy – a sports car, a new kitchen, or maybe even an RV for the family to enjoy. But, by buying all that fun stuff, you’re putting yourself and your family in extreme risk. An emergency fund of 6 months’ worth of expenses should be mandatory – mainly because life WILL happen and you’ll need it to survive. Without it, you’ll end up making stupid decisions, floating your way along with a high-interest credit card, and then you’ll wind up with a job that you hate, simply because you needed the money.
Don’t put yourself in this situation. Set up your full emergency fund as soon as possible.
5) Buy a modest house for the long term
Buying a house is probably one of the biggest financial purchases you’ll ever make, and the decision should not be taken lightly. If you want to be wealthy and have plenty of money in the future, then you should buy a home that’s far cheaper than the bank says “you can afford”. Liz and I earn enough to get approved for a $600,000 home loan, which could easily buy us 5,000 square feet and some acreage in our area.
But we don’t.
For us, we’d rather live simply, pay off our house completely, and then use the extra cash flow to invest heavily for our future. This could lead to an early retirement or it could just lead to more choices for our future. Buying a modest home is one of the quick financial tips I take very seriously. Whatever you do, don’t buy a massive home that will make you house poor for the rest of your life.
When I advise people, I often tell them to make a budget for each month and adhere to it always. I often get head-nods….but very few people actually set up a budget and live by it.
For these quick financial tips, I recommend that people at least track their expenses each month. If you don’t know where your money is going, then you’ll likely hold onto very little of it. But, once you realize what you’re spending on, chances are greater that you’ll stop making some of those stupid purchases that are making you broke.
7) Contribute to an HSA fund
We all have medical expenses. Some are small and insignificant (like an eye exam), but others can be very important and expensive (like cancer treatment). Whatever your future holds for you, there is a pretty reasonable chance that you’ll spend tens of thousands of dollars on medicine and medical treatment, so why not do it with tax free money?
Many high-deductible medical plans offer an HSA fund that you can often contribute to straight from your paycheck. You don’t have to pay tax on the contribution when it goes into the fund, and you don’t need to pay tax when you pull it out. It’s a beautiful thing to avoid taxes on expenses that are almost guaranteed to happen.
8) Marry your financial equal
Of all the quick financial tips, this one might just be the most important. Yes, buying a house is a big deal, but potentially fighting about money each and every day can quickly result in divorce and end up costing you thousands of dollars in settlement costs.
In short, if you’re a saver and have dreams of retiring early…don’t marry a spender.
When you follow your passion, you’re more likely to excel in life. Think about it. In what situation do you think you’d be more likely to succeed? One where you jump out of bed and say, “I can’t wait to get to work today and make a difference!” or one where you open your eyes slowly and think….kill me now. It’s pretty obvious that if you love what you do, you’ll be more likely to do great work there, and in turn you’ll more likely be promoted and earn more.
Now, having said this, you have to be sure your passion of choice makes sense – you know, that it actually gives you a chance to earn a living for yourself. In other words, DO NOT major in the history of German polka. This will likely not put food on the table.
Find a legitimate career that you’re passionate about and give it everything you’ve got. You won’t regret it.
10) Develop more than one income source
You know how your financial advisor tells you to diversify your investments? They recommend you do this because the market is uncertain. Over the course of a few months, some companies could unexpectedly go bankrupt, while others shoot through the roof with earnings. And, no matter how smart you are, you’ll never know which are the future stars and which ones will drive your investments down to zero.
The same is true for your income. Many people only have one, which can be incredibly risky. That one job could be lost in an instant due to:
- economic hardship
- a falling out among employees
- a company restructure
Whatever the reason, your job probably isn’t as secure as you think it is. For this reason, I often recommend that people develop a second, third, and fourth income. Typically these incomes aren’t as large as their primary job, but in the event of job loss, they would at least have some cash coming in to support themselves.
For Liz and I, we have two incomes through our jobs, I provide additional income with this websites, and we’re currently working hard to fix up a house that we can rent out for a fourth income. As the number of income sources increase, the less problematic any one of the income losses will be, which obviously makes for a more secure, stress-free life.
11) Always try to self-insure
One of the quick financial tips that I live by is to self-insure as many life events as possible. In other words, I want to make sure that I have enough money in the bank to cover unlikely accidents without having to pay a monthly insurance fee to some company out there.
Some people take out insurance to cover their:
- washing machines
- new car purchases
- gas lines to their homes
Some of these plans only cost $3 a month, while others cost hundreds each month. But, money wasted is still money wasted.
Liz and I have set up our lives to insure as much as possible ourselves. If our washer and dryer stop working, we have $1,000 in our emergency fund to buy new ones. This is much better than paying $50 a month in washer and dryer insurance for 10 years (at a cost of $6,000).
We currently self-insure our cars as well. Instead of paying $150 a month for full-coverage on each car, we pay less than $45 on the most basic insurance. We can do this because we piled up a bunch of money at the bank and because we drive cars that have very little value. If we smashed one of them tomorrow, we could probably replace it for less than $3,000, which we could easily just pull out of our savings.
In the future, we’ll probably even self insure our lives. Think about it. If you and your spouse had absolutely no debt, a paid-for house, and $500,000 in the bank, then you probably wouldn’t need to pay for life insurance would you? NOPE! Live in such a way that you can reduce your monthly payments, especially to the insurance company.
Quick Financial Tips That Will Change Your Life
I didn’t always live by these financial tips, but since I started I have definitely enjoyed the results. Because of the decisions Liz and I have made, we can wake up every day and smile about the future that’s in front of us. There’s no stress, no arguments, and there are many vacations on the horizon. If this life sounds good to you, then start implementing these quick financial tips in your life. I can almost guarantee that you won’t ever regret it.
Are you following these quick financial tips? How have they impacted you?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.