7 Areas Your Money Needs To Go After A Paycheck
Why is that so many people making fifty, seventy dollars per year are still struggling financially and in debt? Is it the economy pitted against them? Is there a massive wealth gap, or are they being taxed too much? While all of those factors can affect people’s ability to pay their bills, the reality is that most people don’t have a clue on how to manage their money.
Managing your money is not taught in most schools, our parents do not teach it because most of the time, some of our parents are in the same financial pit that other people might end up in. In this article, we’ll help solve that problem by sharing with you the seven places your money needs to go after you get a paycheck.
1.) Retirement Fund
The first place actually happens before you get paid, and that is putting your money in a retirement fund. If you live in America, you can take advantage of retirement funds like a 401k plan. If you don’t have a 401k plan, there are plenty of other options as well.
Taking money out before even receiving a paycheck through a retirement fund could help you build that financial future you want. There’s a saying, and it definitely holds to some truth: “The only worst thing about dying is no money before or after dying.”
So if you’re in your twenties, don’t complacent by thinking that you won’t be retiring until 40 years later. Now is your perfect time to put your money into retirement funds. Putting away at least 5 to 15% of your money before you even receive your income into these kinds of funds is certainly an excellent financial decision.
2.) Different Bank Accounts
Your checking account is going to be your hub for every financial thing that happens to you. Sadly, this is as far as most people get when it comes to their money. They get to their checking account, and they start paying their credit cards, bills, and almost everything out of this account.
The right way to do it is you want to want to have different bank accounts for various situations. You want to properly allocate your income so that you won’t overspend your funds on where it’s not supposed to be spent.
When we say necessities, we’re talking about the bare-bones needs to keep you off the streets and to keep you alive. Food, shelter, transportation, healthcare, and utilities. Everything else past that are wants or desires. Learn to differentiate wants and needs and always prioritize putting a portion of your money into necessities.
4.) Pay Off Debts
Once you start getting a little bit on your feet financially, you want to consider how you’re going to pay off your debts. There are multiple ways to pay them off, depending on how much obligation you have. But in this article, we’ll share two different strategies: The Snowball Method, and the Avalanche Method.
The snowball method is a debt-paying strategy where you tackle the lowest balanced loan first, then working your way up. The Avalanche method is by settling the largest balance or the largest interest rate among your existing loans. However you want to pay your bills, don’t ignore them, and do your best to confront them and pay them asap.
This is where you will truly get your money to work for you. After settling all your obligations and necessities, instead of enjoying the money that’s left, start thinking about how you can grow your money by making investments.
Start small and start smart; you don’t want to get yourself involved in investments for dummies. Get into stable investments like real estate, bonds, stock market, and so on. Manage your risk profile and start with low risk, low reward investments until you can get the hang of it, and grow your money to get involved in more rewarding investment ventures.
6.) Emergency Fund
Whether you have millions of dollars in your bank account or negative $200,000 to your name, everybody should have an emergency fund. Sorting out your emergency fund is going to be one of the first steps to alleviating some of the financial stress that you may have at the moment.
An excellent strategy to get you started is by taking $10, $20, whatever amount feels comfortable out of every paycheck and putting it in a separate emergency that is easily accessible. It needs to be accessible because this is for situations where it’s a real emergency like needing cash because of a sudden severe toothache or if your car breaks down.
7.) Start A Business
Starting a business is another good move you can do to put your money to good use. By doing this, you’re creating another stream of income besides your job and your investments. Like anything else, start small and get the feel of the ins and outs of being an entrepreneur. That way, you can steadily balance your time and grow your business and income.
When it comes to money, it’s not a matter of how much you earn, but how well you utilize and allocate what you make. If you follow our seven ways to put your money into, regardless of your income, you’ll be able to become debt-free and financially healthy in no time.