Everyone is taught basic math while they in school, but those teachings do not extend to how to manage your personal finances when you enter into adult life. It is no real surprise then that so many people end up in debt and having to work their entire life because they made no plans for retirement. Keeping your finances in order so that you never have to worry about money may seem difficult, but it doesn’t have to be that way if you take the time to plan ahead. This is actually something that can be achieved using a basic 4-step plan.

The first step is to create a budget that you and your family need to live by each and every month. In order to do this, you need to keep track of all your incomes and expenses for the course of a month. The expenses are not just your major bills, but also how much you spend on groceries, eating out and entertainment. In short, every time you spend money, add it to your expense list. If you find that your expenses are greater than your income, you need to start looking at ways to cut back on expenses, which usually means making sacrifices in some areas.
The money that you do have to spend should be done so wisely. You should really only be spending money on things that you can afford, as that will avoid you having to make costly payments on credit cards. As nice as it would be to have that great new stereo in your home, it can wait until you have the money to purchase it. This actually applies to big ticket items, too. While it may seem like a big initial outlay, putting down a sizeable down payment on a house or a car can save you a ton of money in the long run.

There are going to be times in your life when emergencies arise, which means it’s always a good idea to have some money in reserve. Once you have worked your budget to a manageable level, think about taking some of the leftover money and putting it in a savings account. Make it an amount that won’t hurt the budget, but a good enough amount that will help grow a nice little nest egg. A good rule of thumb, if you can manage it, is to save 10% of your income.

The final step in creating strong personal finances is to think about making smart investments. That doesn’t mean that you need to go out and play the stock market. What it does mean is that you should take advantage of the 401k plan that your company will likely have on offer. You will put a percentage of your salary into the investment plan, with the company matching up to a certain amount. Not only are you saving for your retirement, you are doing so with free money from the company. It’s a small investment that very quickly adds up.

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