1. How Far Ahead Should I Plan My Finances?
Let’s say you’re 25 years old. You think it’s too early to start investing or planning for retirement, but that’s the wrong attitude to have. You should start saving as early as possible for the rest of your life. Why? Just take a look at the math.
If you begin saving for retirement at 25, putting away $3,000 in a tax-deferred account until you’re 35, and then you stop saving altogether, by the time you hit age 65, your money will be worth more than $338,000. If you start saving for retirement at 35 by contributing $3,000 for 30 years, by the time you’re 65 you will have $303,000.
When it comes to personal money management, you have to plan as far ahead as you can so that you can make gains from interest. Otherwise, you’re just wasting the opportunity to have your money do all the heavy lifting for you and make more and more of itself on its own. All you have to do is have the willpower and self-discipline to save your money, rather than spend it on things that aren’t necessities, like eating out or cable television.
Think about what kind of life you envision for yourself in the future, and you’ll be able to have more control over your finances today. Do you want to still be in the rat race at age 75, because you didn’t save up enough for the future, or do you want to be relaxing at home with friends and family or do you want to travel the world? Would you rather have your kids take out student loans for colleges, set them up for a lifetime of debt, or be able to pay for their college education so they can get ahead in the world? When you frame it like that, it’s easier to save up today.
2. How Should I Invest My Savings and Retirement Funds?
You know how important personal money management and saving up for the future are, and how they can help you reach your goals. You must now take the time to determine the best ways to invest your savings and retirement funds.
There are various methods for investing your money. It all depends on your personal money management style and your judgment. For instance, maybe you want to put your retirement into a less risky investment, but you’re willing to put a few thousand dollars into a riskier investment in hopes of receiving a big payout. Let’s take a look at your options:
- A target-date fund. This is specifically for retirement, since the target date is when you estimate you will retire. When you have a job, your employer may automatically enroll you in a 401(k) or some other type of retirement plan. If you’re lucky, your employer will match your contributions, which is something you should definitely take advantage of while you can. A target-date fund is an investment in a mutual fund, which will include diverse investments, and not just investments in the stock market, for instance. You can choose which mutual fund you invest in and see their returns and how risky they are considered. Many people like this option because they save up for retirement for years and don’t want to take any risks with their money. Instead, they just want it to grow in a safe and stable way with the mutual fund.
- Small-cap growth stocks. If you are more than 25 years away from retirement, you can be a little riskier with your savings and invest in small-cap growth stocks. These are smaller companies that are going to be more volatile, but have potential to make you a lot of money if you invest right. Their market capitalization is between $300 million and $2 billion. The best way to deal with this volatility is to have a portfolio that is diversified and also includes large-cap growth stocks, which have a capitalization of more than $10 billion.
- Blue-chip stocks. Blue-chip stocks are stocks from companies that are reliable, consistently perform well, and are extremely profitable, such as Amazon, Facebook, AT&T, Nike, Microsoft, Johnson & Johnson, and ExxonMobil. They have a bright future ahead and will be sure to make you money in the long term. Since they are typically pricey per share, you may only be able to significantly invest in one or two of these. Some blue-chip stocks pay out dividends to shareholders, which you can then reinvest quarterly.
While you may find some money management tips out there that tell you to invest in things like bonds or high-interest savings accounts, mutual funds and the stock market are going to be your best bets for building true wealth over time. The stock market especially is a wise investment, because investors consistently make 10% interest in the stock market annually. It’s not likely you’ll find something with a higher return than that.
3. What Is the Best Financial Planning Software for Individuals?
To start taking control of your personal money management, you’ll need financial planning software to help you out. Some of the top software available includes:
- Personal Capital allows you to link all your bank accounts, spot hidden fees, set spending and saving goals, calculate future college costs, save for retirement, personalized portfolio management, fiduciary advice, and more.
- Mint allows you to easily create budgets, get a credit check, track your bills and receive bill alerts, and see when your balances are low. It even gives you suggestions on where you can cut back on your spending.
- Quicken puts all your retirement accounts into one place, tracks your spending, shows you upcoming bill reminders, generates cash flow reports, shows your breakdown of how you spent your money, shows all your investments in one place, and creates a customized budget for you.
Each of these can be used on your phone or computer, so try them and see which ones are most intuitive and the easiest to use for your personal money management goals.
4. How Can I Continue My Personal Money Management Education?
Though you know some money management tips, the best way to set yourself up for success is to keep educating yourself. Learn about all your investment options, personal money management facts, and how to save up for the future by subscribing to Money Map Report.
Money Map Report will arrive in your inbox and teach you which investments to make, how you can get free federal money, how to retire like a king, and much more. You don’t have to go searching the internet for this information. You’ll simply receive it with your subscription.
It’s time to take control and get your personal money management in order. Sign up for Money Map Report today.