- Personal Finance»
- Understanding Finance
8 Tips on How to Become Financially Self Sufficient
Managing your money is important as is financial self sufficiency. There are some basic tips you can follow to attain financial self sufficiency. These may be reminders for some that are already on a good financial track, but may be a great starting point for those that haven't done it before.
1. Save your money. This seems too obvious but its one of the most important things of all. As for a general recommendation, saving five to ten percent of each paycheck is a great place to start. If you can do more, even better. This will be great money to invest as you have enough to do so.
2. Plan ahead. You want to define your financial goals completely. What do you really want out of life? Do you have any dreams? I always had a dream of owning a home when I was younger, and that came true after some planning and decisions that we made. Its exciting to move forward on your dreams, whatever they are. Make the plan, and then implement it.
3. Do not overspend, and keep to your budget. It is too easy to overspend, and you can start young and get into way too much debt. Its not worth it, just don't go down that road. Keep or get a good credit rating, then maintain that. If for some reason you have never done that in your own name, make sure to do that as well.
4. Look into tax deferment. You can defer your taxes, and take advantage of things like employer retirement plans. These are great savings plans. The money that is contributed to things like IRAs and 401ks and the earnings on them don't have to have taxes paid until you withdraw them.
5. Be smart about your taxes. Its good to know your marginal tax rate as you can then have an idea how much of your income is going to your taxes. You can take advantage of some tax favored investments as well, things like rental real estate on your home, and IRAs.
6. Think ahead to estate planning. You will want to make a will so that you can rest easy knowing that after you are gone, that your wishes will be followed regarding your money and assets. This is so smart to think about your loved ones this way as well. If you do not plan ahead in this way, its likely the state can come in and do that for you. That isn't usually a first choice, and far from it, so its worth the estate planning. Every so often its good to see if anything needs to be changed, as things can change like your personal circumstances, or even estate tax laws.
7. Continue to learn all you can financially. People often self educate themselves in a variety of ways. You can read many of the amazing books out, go to seminars, and seeking professional financial help. The more you know, the more you can act on that knowledge, say with investments. You will feel more comfortable in taking risks when it is safe to do so, perhaps.
8. Get and maintain your ability to earn income. Keep your skills sharpened, and know that any investment of time and effort you put into the things mentioned here can really help you out long term. Its probably the best insurance policy out there.