Become an expert: every single financial tip you need in one place

You don’t need to be born rich, inherit a huge amount of money or win the lottery to have financial stability. If you do it right, you can work your way to a wealthy future.

Have you ever wondered what is that financially successful people have? In order to understand the main features of a wealthy person, here are 5 traits every self-made millionaire shares:

1-    Frugality

You are probably thinking of a lot of millionaires that not necessarily live a frugal life, but most self-made millionaires will name this as one of their main practices. Frugality is finding ways to get the best value for your money, not necessarily cheap things. Also, it means that you don’t waste your money on things you don’t need.

2-    Making wise investments

It takes money to make money. Most self-made millionaires understand the concept of compound interest, which is the main factor to build wealth. But they also invest in themselves: they take good care of their healthy habits so they don’t have to spend a fortune on medical bills, they invest in a good education, and they start their own businesses.

3-    Discipline

Setting a goal is one thing, but then you have to work in order to get there. If you want to become a millionaire, you need to be disciplined and stay focused. Try to avoid getting sidetracked, but if you do, you need to get back on track again. Monitor your spending, cut your expenses, or even better: increase your income.

4-    Optimism

Most self-made millionaires are optimists. They’ve learned that even if things go wrong, there is always a bright side. They learn from their mistakes and move on. They also know how to enjoy life, because they know there’s more to life than just working their way into a big fortune.

5-    Willing to get their hands dirty

The road to becoming a millionaire is not always easy. Sometimes, things get a little bit rough and you need to get your hands dirty. Sometimes, you will need to work late nights, work hard and do things for yourself. They take responsibility for their actions and, most importantly, they understand that they are responsible for their financial destiny.

Start early — while in college!

When you’re in college it’s the moment of transitioning from the life of a child into the adult’s world. Among other things, this includes learning how to manage your finances. The more you learn at this point in life, the better you’ll do in the future if you keep following these financial tips.

1. Create a budget

A budget is a key element in everyone’s life, whatever’s the point they’re at. You can learn how to create a family budget, budget-friendly summer plans, or even a budget for dates. In each case, it’s all about setting a fixed amount of money for your spendings and sticking to it. If you wish to lower your student debt, you should think about creating a budget right now.

2. Research your options

It’s always necessary to check all options before making a purchase. Whether it’s buying a car, choosing a brand of clothing, or taking out a loan, you should do your research beforehand. For instance, you need to understand what’s what in student loan debt before signing your agreement. Nowadays, it’s not hard to see what different companies have to offer for the same amount of money, or how much they charge for a certain product or service. You can do most of it online!

3. Benefit from discounts

There are many ways to lower the price of a product or service, and one of them is looking for discounts. If you dig in a little bit, you’ll find coupons, hot sales, and rewards in almost every company. With just a little planning you can make the most of them and save a lot of money in the process!

Read this article on how to become an Extreme Couponer!

4. Build a solid credit history

A good credit score may not seem as necessary now, but it can help you a lot in the future. It’s a great idea to start building it while you’re in college when you can take Student Credit Cards and benefit from their rewards. Here’s more information on what you should consider when building good credit from scratch!

5. Avoid theft

This often goes unsaid, but it doesn’t do any harm to clarify it: identity theft can have big, negative impacts on your finances and you should take all needed precautions to avoid it. If you’re online banking, here’s how to stay safe while at it. If not, you can still protect your identity by being extra careful with how, where, and with whom you share your information.

Read this article to find out 5 keys to protect your personal data!

 

3 rules of thumb you should live by

1-    Don’t let your debt get out of control

If you are trying to repay your debt, whether it is a student loan, a credit card debt or any other kind of debt that you are trying to manage, stay on top. Ideally, your monthly debt payments shouldn’t exceed 36% of your gross monthly income.
If you have a costly debt, like a credit card debt, find ways of minimizing interest charges. You can look for a 0% balance transfer to minimize the total amount you need to repay.

2-    Try to save at least 10% of your income

You should aim to save 10% of your income every month, considering you are saving additional money into a retirement plan. This 10% will be ideally used for an emergency fund, in case something unexpected happened. This way, if you need the money, let’s say, for an unexpected medical bill, you will be able to cover the cost without having to incur in debt.

However, you can use the 10% rule to save for different goals.
As for retirement, there is no rule when it comes to how much you should save, but if your company offers a 401(k) and a matching contribution benefit, you should aim to contribute at least as much as your employer.

3-    Keep your house debt on track

A huge part of financial planning is calculating how much you can spend on a mortgage. Using the 36% rule as a guideline and keeping in mind all your other expenses, figure out how much you can spend on a mortgage payment without exceeding the cap. Another rule for housing is that it shouldn’t cost more than two and a half to three times your annual income.

If you follow these rules, you will be able to keep your finances on track. Of course, there are a lot of other things that will apply to your particular financial situation, so be sure to create a well-crafted plan!

 

Invest your way to financial independence

Choosing the right investment may sound like a difficult thing to do, but it really only comes down to your time horizon and your tolerance for risk.

Overall, there are investments that make sense for short-term investors and others that are more fit or people with a long time horizon. Some investments are perfect for people with a low tolerance for risk, while others may be a good option for people who don’t mind some volatility.

The first thing to understand to be able to analyze the potential investment options is the different types of accounts that you can hold your investments in. 

Here are some of the most common investments for each time horizon:

Short term investments (3 Years or Less)

Online Savings or Money Market Account

There are many online-only savings accounts that offer interest rates higher than most traditional banks. Money market accounts offer a similar income. You may only make a 2 percent annual return, but all of your money is FDIC-insured up to $250,000 and you can withdraw at any time without paying penalties.

Short-Term CDs

With a CD, you agree to keep your money in the bank for a specified length of time (terms as short as 1 month) in exchange for a higher interest rate. With CDs, you lose some flexibility but may be able to get higher interests rate.

Intermediate-term investments (3-10 Years)

Longer-Term CDs

CD interest rates generally rise based on the length of the term. It’s income you can count on, and all CD funds are usually FDIC-insured. Rates may be highest if you can afford to make a  large deposit.

Short-Term Bonds and Funds

It’s easy to make money off corporate and government debt by purchasing bonds.  There is some risk to bond investing—riskier bonds usually pay higher rates—but there are many bonds that are practically a sure thing. 

Peer-to-Peer Loans

Peer-to-peer lending is like bond investing, in the sense that you are essentially buying debt in exchange for a return. But in the case of P2P lending, you’re lending money to an individual. Historical annual returns from LendingClub 4.85 percent for the safest loans to 6.4 percent from riskier loans.

Low Volatility Stocks and Index Funds

It’s generally best to avoid putting your money in stocks unless you have a long-term strategy. Stocks can go down in value quickly and may often take years to recover. Bearing that in mind, there are certain kinds of equities that might make sense for someone with a time horizon between five and 10 years.

Long term investments (10 years+)

Individual Stocks

With an investment time horizon beyond 10 years, most investors can expand their risk tolerance and invest in stocks. If you are saving for a long-term goal you will be giving the stocks time to rebound and earn you money.

Index Funds and ETFs

There are many mutual funds and exchange-traded funds that are designed to mirror the performance of the S&P 500 or other indexes. They are usually passively managed and have low expenses, and are an easy way to build a diversified portfolio.

If you want to generate returns that are better than index funds over time, you may choose to turn to mutual funds and exchange-traded funds that are actively managed.

Robo-Advisors

One of the newest innovations in investing is the Robo-advisor that are only found online and will manage your investments in an automated way using algorithms and advanced software

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