Despite the fact that capitalism is a major part of our daily lives, few of us reach adulthood with the knowledge necessary to make wise financial decisions. If we’re lucky, someone has taught us how to balance a checkbook somewhere along the way. But most people don’t even know how to create and adhere to a basic budget, much less use credit cards appropriately or set up an investment portfolio. In short, it’s no surprise that so many adults find themselves facing a mountain of debt with no real hope of digging themselves out. But you have the capacity to learn the ins and outs of basic personal finance, and you don’t have to wait for the consequences of bad decisions in order to learn your lesson. Here are just a few helpful guidelines that can get you started down the path to making wise financial decisions.
You might want to start by taking a personal finance class. You can often find such offerings at your local community college, adult continuing education center, or even through your community center. In some cases these courses are available online. And the benefit of taking such a course is that you’ll get a broad overview of personal finance, including household expenses, retirement accounts, investments, and more. But you may also have access to specific and practical lessons like how to create your own budget or pay down credit card debt.
In truth, credit cards are a source of financial woe for many adults, mostly because we tend to think of them as cash rather than what they are: loans that must be paid back with interest. Buying on credit can certainly be useful and convenient, especially in the age of online shopping. Can you even imagine going to the airport to purchase a plane ticket with cash in these days? They’d probably sick TSA agents on you. But that doesn’t mean you should treat your credit cards as a bottomless piggy bank.
When you take out a loan for a car or a home, you have a plan for repayment. Too many people pay down credit cards only to max them out again. This is great if you want to pay two or three times as much for every purchase thanks to interest – so not very wise, as money decisions go. But think about it logically. If you thought a tube of toothpaste would cost you $15 instead of $5, would you buy it? What if a pair of shoes was $300 instead of $100? What if a plane ticket was $1,200 instead of $400? You’re starting to get the picture. Credit can be dangerous if you don’t use it wisely.
And don’t forget about planning for your financial future. For starters, you should have enough money in the bank to pay your monthly expenses for six months to a year should you face unemployment, a medical emergency, or other circumstances that stop you from earning. And then there is the distant future. Even if you have a 401K in place through your job, it might not be enough to support you after the age of retirement, especially with people living longer in general. So think about setting up supplemental provisions like a Roth IRA or an index universal life plan. You won’t be sorry when you reach retirement and have enough money to continue enjoying the lifestyle to which you’ve become accustomed. And it all starts with getting educated so that you can make wise financial decisions. If all else fails and you’re still having trouble figuring out how to manage your money, get some help from a professional financial advisor.