Money Matters

How to Increase Future Financial Opportunities

By: Avery Phillips

Do you ever wonder how people are able to fund their dreams, like buying their dream car or their perfect house? Or maybe you just wonder how people seem to have so much extra spending money. Perhaps you’d like to save for future endeavors or possibly even for retirement, but you’re just not sure how to get started. Well, in order to accomplish all of your financial goals, you’ve got to start with a budget, begin to invest wisely, and control how much debt you take on.

Create a Personal Budget

First things first, creating a personal budget is absolutely essential to your financial success. No matter what your plans are for the future, you can significantly increase your chances of getting what you want by tracking your spending. If you want to buy a car, buy a home, pay off your debt, or just start saving for the future, you have to start budgeting now if you want it to become a reality.

 

The best way to do this is to sit down and track all of your monthly expenses. Put them each into different categories and decide which ones are essential and which ones are not. You might put down an entertainment column, food, utilities, rent, and more. From there you can set up a spreadsheet detailing everywhere that you spent money and you can calculate trends. You may find out that you’re eating out or grabbing coffee more often than you should and that those funds could be used on groceries instead. Perhaps you’re going out with friends every weekend, and you realize you could cut that down to a couple times per month. Changes like these will add up quickly. From there, you can begin to organize your finances and place money where you actually need it most — possibly for future financial milestones.

Investing Wisely

It’s also crucial to think about how you’re spending your money — not just on a day-to-day basis but long term. Let’s say you bought a new car a couple of years ago and you’re thinking about selling it so that you can get a newer model. That might not be the best option financially speaking if you’re trying to save money for the future. You’re likely going to be trading up for a more expensive model, which comes with a higher monthly payment as well. This means you won’t be saving money in the long run.

 

So, in this scenario, it’s probably a better frugal decision to stick with the car that you have and work on paying it off. Once you pay it off, you’ll likely have a significant amount more financial freedom than you did before. You’ll be able to spend your money on more essentials and work toward any financial goals you see in your future.

Control Your Debt

Part of investing wisely is taking on some debt. Anyone with a well-rounded financial portfolio and clean credit score will tell you that they had to take on some debt in order to get there. As such, you’ll have to think about what investments are most important to your financial future. That is to say, if you take on this investment now, will it pay off for you later on?

 

A perfect example of this has to do with student loans. An education is always a wonderful financial investment because you’re contributing to your career down the road. With a college degree and some educational experience under your belt, your very likely to get paid much more than you would without it. So, if you’re wondering about whether to invest in your education, it is a great financial decision.

 

However, on the other hand, you should know what to do with student loans and refunds. Educational loans are just that: for your education. You shouldn’t take more money than you need. Sure, there are plenty of situations where you need money for housing, books, classes, food, and more. That can all add up quickly. However, if you find yourself with additional money after adding up all of these costs, you should leave it be. The fact of the matter is, you’ll have to pay it all off later. You’ll end up with hefty monthly payments that can be difficult to manage. So, anything you can do right now to save yourself financial trouble later on is a good decision.

 

Other examples fall right in line with what I’ve said about student debt — like credit cards and personal loans. If you don’t need them, you don’t have to have them. Both of these come with quite a large percentage of interest, so if you plan on spending the entirety of the loan, you’ll find it hard to pay off and you’ll end up paying back much more than you borrowed in the first place. It’s just not a strong financial choice. Although, credit cards are good for your credit if you spend small amounts and pay it off quickly. As such, it’s not a bad idea to have one for emergencies or small purchases that you know you can control. If you’re afraid that you might overspend, don’t indulge — it’ll only hurt you more later on.

 

With all of that being said, strong financial decisions that will open you up to a better financial situation down the line are things like housing. When you buy a home, everything you pay on your mortgage will come back to you when you decide to sell the home. When you stay in a home for a long time, you’ll get much more equity back after you sell. Even if a home slightly depreciates in value, you’ll still get a substantial amount of money back when you choose to sell.

 

Other items, like cars, are OK to buy out of necessity, but they consistently lose value the longer you have them. Sadly, after a vehicle is purchased, it’s difficult to ever get your full money back. In some cases, you’re lucky if you get back half what you paid for it. So, while you can make up some of your losses, it’s not quite the same as investing in a home.

 

In conclusion, setting yourself up for financial success has to do with understanding where your money is being spent, correcting the issue by budgeting properly, and saving for the future. You can sprinkle in smart financial decisions that will improve your credit (like having control over credit card spending and paying your mortgage on time). Top that off with a manageable amount of debt and you’ll set yourself up for limitless financial opportunities.

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