Just as physical health is easier to maintain throughout life if you build good habits early on, adopting healthy financial habits from a young age can help ensure financial fitness through retirement and beyond....
Building good financial habits
Just as physical health is easier to maintain throughout life if you build good habits early on, adopting healthy financial habits from a young age can help ensure financial fitness through retirement and beyond.
Earn and save
Most of us aren’t born with an appreciation for an earned dollar. This is why it’s up to parents to teach children the value of earning a living. A fixed allowance, where a child trades labor, like small household chores, for a certain amount of money can help kids make the connection between being productive and earning money.
Along the same lines, adults should build savings by paying themselves their own “allowance” out of every earned paycheck. This allowance should be between 5 percent and 10 percent of annual income and should be automatically deposited into a savings account as if it were a monthly expense.
If your company offers an employer-sponsored retirement plan, you should participate. These company-sponsored plans include several benefits to employees beyond helping to build a nest egg for retirement. Among those benefits: Contributions are easy to make because they are automatically deducted each pay period; the compounding interest tied to these plans grows small, consistent contributions into substantial retirement savings; employee contributions and investment gains avoid being taxed until they are distributed; and some companies match a portion of the employee’s contribution, adding to the nest egg.
Effective financial planning begins with a solid monthly household budget. Develop a spending worksheet to track spending habits. This is a good way to get a handle on your expenses as well as to spot unnecessary expenditures that could be cut out of your budget. Organize budget and financial records for a smoother, more efficient system of processing bill paying and tracking your financial behaviors.
Reconciling that checking account monthly will provide financial peace of mind and keep checkbook figures accurate and up-to-date. Knowing how much money you have at any given time can safeguard against bounced check fees that could occur when a balance is too low. A monthly reconciliation ritual also prevents the frustration of having to reconcile several months’ worth of bank statements.
It’s important to review all bills and statements as soon as you get them, in case there are errors that could be costing you your hard-earned money. Along the same lines, paying credit card bills on time will avoid late fees.
Financial health is a lifelong journey, for better or worse. It’s in every consumer’s best interest to be his or her own financial advocate from young adulthood through retirement.
This content was provided by National Restaurant Association partner Discover.
Disclaimer: The articles and information provided herein are for general informational purposes only and are not intended to address specific issues or problems you may have, for which you may need to obtain professional advice. The trademarks mentioned herein are the property of the respective companies to which they relate.