For those of you who will be graduating from college soon or who have recently graduated from college, there are a few personal finance tips that will help you avoid making mistakes that many new college graduates make. Unfortunately, families often will not discuss personal finance topics so you have to learn for yourself. This way can lead to trial and error. To avoid costly mistakes, consider the following:
- Don’t base your budget on future earnings: While it may seem exciting to dream about the things you can do and buy when you settle into your career, the reality is that sometimes it takes a while to work up to the position you are wanting with the salary you desire. Even with a degree, you will need experience to advance in the career. When I graduated with my bachelor’s degree, I still had to start at the entry level. With experience came career advancement, but it certainly didn’t happen overnight. Your budget should be based on your current salary. Don’t get in over your head in debt that will take you years to pay off.
- If you can’t afford to pay cash for something, don’t use your credit card: We tend to use credit cards as crutches when we can’t pay cash. Crutches are designed to hold you steady, but why would you use crutches if you didn’t need to? In other words, avoid the debt of credit cards and you won’t be dependent on the crutches. Living on credit cards is a slippery slope. Save up and pay cash. It may take a while longer, but you won’t have to incur interest expenses and payments.
- Don’t automatically up your lifestyle when you get a better job: Too many times, people will automatically spend more once they make more. Why not maintain your same lifestyle and save more or get out of debt? If you could survive on the old salary you should certainly be able to live the same lifestyle with the new salary and build wealth.
- Don’t wait to start contributing to a retirement account: Start contributing to a retirement account as soon as possible. Once you are eligible to begin making contributions, start making them even if you can only contribute a small amount. Time is on your side. Don’t be like many individuals and wait until you are in your forties or fifties to begin your retirement savings.
- Don’t wait to build your savings: Automate your savings by having a specific amount transferred from your checking account to a savings account every week or every pay period. It will be easier than manually making savings contributions. The compounding effect will help your savings grow exponentially over time.
Take it from someone who wishes she could go back and change past financial decisions. Begin making wise financial decisions today!
Would you like to have additional sources of income even though you may be working full time? I know I would like to generate income while still working full time in my career. You may be thinking that you don’t have time to go out and get a part-time job and neither do I but there are ways to generate extra income.
One way to created additional income is to open a store on Amazon and sell items online through the store (https://services.amazon.com/selling/benefits.htm). Some of the categories of items that can be sold on Amazon are:
- Baby products
- Beauty products
- Device accessories
- Automotive & power sports
- Cell phones
- Handmade items
- Home & garden
Please note that some categories require approval by Amazon before they can be sold. I personally buy items from time to time on Amazon and I have found that often shipping is much quicker than on Ebay. Amazon offers one-click purchasing and paying and I find that as an added advantage.
Another way to generate additional income is to leverage skills you already possess. For example, if your job is graphic design you could do freelance graphic design on the side. If you are an expert in a particular subject, you might want to consider becoming a tutor. You could tutor online through websites such as www.tutor.com, www.tutapoint.com, and www.tutorme.com. These jobs would allow you to work from home in your spare time.
If you have photography skills you could become a wedding or special event photographer. Social media would be a great way to advertise. Generally, photography classes are taught at community colleges or local photography companies. With this type of side job, you could set the hours that best work with your schedule.
If you enjoy writing and have specialized knowledge, create an e-book to sell online. The one time effort of the writing the e-book can payoff multiple times. A great article with tips on selling e-books is found at http://jakonrath.blogspot.com/2013/02/how-to-sell-ebooks.html. There are classes that teach you how to create and sell e-books. One such class on Udemy is https://www.udemy.com/how-to-retire-early-by-publishing-and-selling-kindle-ebooks/.
Creating and selling e-books is a great way to create a passive income stream meaning you do the work once and sell it over and over again. While you may not become a millionaire by selling e-books, you might just create an additional income that can be used to pay off debt or invest for the future.
Finally, create services such as pet sitting, lawn care, housekeeping, etc. Again this can be scheduled around your work schedule so that it does not interfere with your full-time job. Take time today to think of ways you can create an additional stream of income.
If I asked you to list characteristics of debt-free people, what would your answers include? You might be surprised at common characteristics or traits debt-free people possess.
1) Set goals – Have you ever met someone who is sets goals and makes every effort to achieve those goals? People who possess this trait focus on what they want then take the steps to reach that goal. Debt-free people has to set a goal to get out of debt then implement the action steps for obtaining a debt-free life
2) Have confidence – With this I don’t mean arrogance, just confidence. There is a difference in the two. To have confidence means they don’t put there trust and self-confidence in material possessions. That don’t care that others may not understand why they don’t buy a new car every two or three years. Older used cars are not a problem to people who are confident. I have driven my car for 7 years and dread the day I have to purchase another car. My car has dings, dents, scratches and the paint is pealing in stops, but it doesn’t bother me. It gets me where I need to go.
3) Possess patience – Now, this can be a difficult trait for some people, myself included. I used to think I had to obtain everything now, which is called instant gratification. Over the years I have learned to be patient. It takes time to build get out of debt and build wealth but it can be done. Becoming debt-free requires patience and persistence, so don’t give up. The budget will change as you become financially independent.
4) Will make sacrifices – Anyone who is debt-free has had to make sacrifices along the way. You have to realize that you have to give up some things temporarily in order to gain your financial independence. Once you reach your goal, you will be able to pay cash for items or for investments. The sacrifice is normally a short-term process. Just think about those people who are physically fit. They didn’t get that way without making sacrifices but the sacrifices paid off for them.
5) Think of family before themselves – Debt-free people realize they want to give their family a better life meaning being free from the burden of debt. They don’t just think of themselves but their family and even future generations. Getting rid of the “me” mentality is key to putting others before yourself. We all can be selfish from time to time but we should keep that emotion in check. It can be dangerous if it gets out of control.
Debt-free people come from all walks of life and all socioeconomic backgrounds. Millionaires may make less than $75,000 a year or make hundreds of thousands of dollars a year. There is no one size fits all for a debt-free person, put possessing these few characteristics can be helpful. Determine to get out of debt-free and work on the traits that will help you become debt-free.
Wondering if the stock market is too high for you to invest in? Take a tip from Warren Buffett in these times of stock market highs. Buffett is considered one of the best investors of all times and learning about his investing style can be beneficial to even the most novice investors.
What does Mr. Buffett do when the market is high?
1) Focuses on great businesses – He continues to focus on great businesses that are priced right. Mr. Buffett is quoted as saying, “It is far better to buy a wonderful business at a fair price than a fair business at a wonderful price.” His strategy here is to buy a great business at a good price. In other words, if it is a great business, it should do well and an investor will reap the benefits of investing in that type of business. This reminds me of times when I have purchased a great product even though I may have paid more than for a lessor product. I could have saved money by purchasing the lower priced product, but the outcome would have been less than desirable. In the end, I was glad I paid more because the product was worth the cost.
2) Invests for the long-term, not the short-term – I am always impressed by this strategy that Mr. Buffett uses. He doesn’t look to make quick, short-term gains, but realizes his investments are for long-term results.
As I have learned over the years, trying to time the ups and downs in the markets is extremely difficult. If we could exactly predict when the price would go up, then we could become wealthy. Since we cannot predict the market, make your investment strategy for the long-term and be prepared to ride out the bad times to reap the benefits of the good times.
3) Build positions in your portfolio over time – Use the dollar-cost averaging method to build your portfolio. Choose a stock that you want to invest in and then invest a specific dollar amount in that stock each month. For example, invest $100 every month in a stock of your choice. Each month you will purchase a different number of shares based on stock price at the time of purchase. Once you have initially purchased the stock, you are allowed to buy partial shares using dollar-cost average.
For illustration purposes, let’s suppose that you own shares of GE and have chosen dollar-cost averaging to continue purchasing the stock. Today shares of GE are trading for $31.29 and you have chosen to invest $100 using the dollar-cost averaging method with a $3 per transaction fee. You would have purchased approximately 3.1 shares of GE stock [($100 – $3)/$31.29]. Each month the amount of stock purchased will vary based on the price of the stock at the date of purchase.
Choosing the dollar-cost averaging approach will gradually build your holdings in the stock you choose to invest in. You will be investing at a slow and steady pace over the long haul which levels out the ups and downs of the market.