Here are some of my additional comments to the 5 steps you just watched.
Identify your goals
This is an extremely important first step in your money management, because you are defining what financial success means to you. You need to take the time to think about where you want to go; you can start out idealistic, or conservative, but remember to set goals with a time in mind (try a couple small-medium short term goals and maybe 1 -2 longer term goals) Some examples: Pay of all credit card debt (short-term), Pay off all student loans (long-term), invest $100 per week in a retirement fund (short-term), Save for a down payment on a house (long-term). This can be a frustrating step, but don't be afraid to write these down and hold yourself accountable. Goals are a way to help you resist the everyday impulses to spend your money un-wisely - whether that be hording or spending frivolously . Next you need to establish a budget to help track how well you are meeting your commitments (this is an extremely important step).
Pay off debt
Debt is something that takes your money away before you have a chance to do anything with it, it's binding and restrictive. With that said, there is a such thing as good debt. Follow this simple rule for deciding whether or not to use credit: Only use credit to purchase assets (things that will make you money by appreciating in value). This is harder now than it has ever been because of the ease of using a credit cards, but in order to be in charge of your money is to only spend cash on things you can afford now, and only use credit on assets that will make you money. Mortgage (house debt) - Good, MasterCard for a new TV - BAD
Prep for an emergency
This is probably the most difficult of the 5, as it is probably the easiest to overlook (especially when you are young). However, careful attention to this piece of your financial life will pay big dividends in the future; when that rainy day comes you will not need to use your credit card for the emergency which could potentially lead to some financial distress. Most experts on the subject typically suggest anywhere from 3 to 6 months of cash (or other very liquid, low-risk investments. i.e. money markets or short-term CDs) to cover your necessary expenses. Don't get bummed out by this one; as you build your budget keep in mind that anything can happen and sock away a fair amount each paycheck for such events.
Invest
For the beginner, this should be the last thing on your mind (ehh, kinda). There are many things that should be done before getting into the guts of investing your extra money (see above). Only once you have completed those steps are you ready to invest. Without getting too deep in this subject, when you are considering investing remember t3 things to guide your decision: Risk tolerance, time horizon, and liquidity of the investment (how easily you can convert it to cash). Check out the links to the right for more information.
Have Some Fun
Remember, understanding your finances is meant to allow you to enjoy the money you have in the way that you want. It's not about hording money and being stingy. Establish your goals to define success and create a realistic plan to meet those goals. Get over the hump, stop procrastinating, and start taking control of your finacial life. Take the time to learn and think about your current position and where you want to be 6 months, 1 year, 5 years from now. You may find it to be a little discouraging at first, but don't give up; keep taking baby steps to learn more and more every day, before long you might just sound like you know what you're talking about:-)
-GB
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