Although I have chosen to pursue a career in finance, I try to keep the talk of financial matters to a minimum. However, those who know me best know that sometimes my passion for the nuances associated with money occasionally get the better of me. If I am not careful, I can quickly find myself searching for a pen and paper to begin giving a full-on Ivy League lecture. I assure you that will not be the case today, but I do want to take some time to impart just a few words of wisdom.
The first rule to any good strategy is to have a plan. Would you start a new diet or gym routine without first knowing your weight or where you want to be? I would hope not! So you begin any sort of financial endeavor by knowing your net worth. Here comes the brief “lecture” portion of the article: your net worth boils down to your assets minus liabilities. Taking the MBA talk out of it, it translates to “what you own minus what you owe.” Start there, and determine are you where you want to be at the moment financially. If you are, great! If not, it may be time to start saving more.
I like to think of saving in two forms: long term and short term. Short term savings is the money you budget to save each month. The best way to ensure you save is to set up automatic payments into your savings account. I think it’s brilliant when an employer lets you direct deposit your paycheck into multiple accounts. If you can do that, start by estimating how much you could save each month and then have that amount direct deposited into a savings account.
Long term savings tends to come in the form of a 401(K) or other retirement accounts. If you are lucky enough to have an employer-sponsored plan and they match your contributions, you need to be taking advantage of that money. With a match, depending on the plan, they typically match you dollar-for-dollar up to a certain percent. For example, if your employer matches five percent, then you need to be putting at least five percent of your paycheck into that account to get the full match. If that five percent is $100, then the employer would put in another $100, making $200 in the account for that pay period! It’s the best way to double your money with a very low risk.
As promised, I am keeping it to only a few brief words of wisdom, however, if you do have any additional questions maybe it’s time you got serious about your financial health. There are many great resources available to help you and often many time many of them are free. Will Rogers said, “Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.” It’s time to make sure you are not one of those people!