I don't know of a single person who doesn't want to increase their master over their finances. More than simply being a good manager of money, however, we want to see that money grow. Financial success doesn't come to us by itself. No, it takes a level of intentionality and education to make it happen.
If you feel your financial savvy is lacking, don't worry. I'm here to share some of the top money management lessons that you will want to master as soon as possible.
4 Money Lessons to Learn While You're Young
1) Invest early and in the right things.
One of the biggest mistakes I see people make is to not focus on preparing for their financial future as soon as possible. If you wait until you're 50 or older to start saving for retirement, you're going to be well out of luck!
Investing is the best way to prepare for retirement, often in tandem with 401ks or other retirement plans. What we must do, however, is ensure that we're investing in the right things. From the get-go, the selection of investments that are stable and steady is key in a portfolio. This can include low-risk stocks and bonds, but it can also include something like turnkey real estate. When you invest in real estate with the intention to buy-and-hold, you benefit not only from the appreciating value of the property but from the diversification of your income streams.
More cash flow is more opportunity to invest and build wealth.
The investments you want to avoid are the ones that promise quick cash and high returns. These are often very risky—more akin to a gamble than an investment.
2) Pay yourself first.
This is critical. When you need and want to have room to invest and save, you have to actually put money aside. For some of us, this can seem like an impossibility. It seems like you have no room at all for savings when the bills are paid, the taxes are collected, and the necessities are covered.
However, think about this: if you really want to improve your financial situation, you have avenues. One thing you must do is pay yourself first. Some say to think of it like a self-tax. It is a non-negotiable amount put aside into savings that you treat like any other bill: mandatory.
If that $50 or $100 in savings seems like too much of a squeeze, you find a way to make it work. You eat out less, you cut down on brand-name purchases, start couponing, and cut the financial fat from your life.
3) Always weigh your risk.
When delving into investments, you must master the idea of risk management. Every investment comes with inherent risk. Some more or some less. Typically, risk scales with its promise of profits. Higher risk, higher rewards. That said, the "high-risk" investments tend to be the sort that promise riches quick and easy. Lower risk investments, by the contrary, won't make you rich overnight but they provide a solid foundation for your future wealth. This only grows along with your portfolio.
The thing to remember here is to never invest more than you're willing to lose. Don't go into an investment with the mindset of "well, I'll make it all back and more." Don't make that assumption. Instead, investigate your investments thoroughly, weighing the risk, and never invest more than makes you comfortable. Don't put yourself in financial jeopardy for an investment.
4) Have a money plan at all times.
Budgeting is just about the most boring thing many of us can think of. However, when you're looking to grow your wealth and have mastery over your money, a budget is absolutely necessary. Make sure that every dollar is accounted for and allocated.
You also must adjust your budget over time. As your needs change and your wealth grows or shrinks, you must revisit and change your budget accordingly. Even if things don't seem to change, adjust your budget anyway. Fine-tune it so that you get the most from your money.
For young investors and those looking for a fruitful financial life, mastery over these principles is key. Don't get trapped in the thinking that you don't have enough money or enough skill to make it. You can start with any amount, any education, and improve your financial life in the long-term. You only have to be willing to do what it takes.
What financial principle has helped grow your wealth? Share in the comments.