Money Management Tips
- OPEN UP A ROTH IRA
- MAX OUT YOUR 401K
- CREATE A PERSONAL FINANCIAL BUDGET
- OPEN UP A CREDIT CARD
- INVEST IN THE STOCK MARKET
Opening up a Roth IRA
This is hands down the most powerful investment tool that exists today. Believe it or not, every year you spend without a Roth IRA makes it statistically impossible to catch up to someone else who started it a year before you. A Roth IRA allows you capture the power of compound interest, while safeguarding your profits from taxes. All your yearly contributions ($6,000 per year) up front are taxed, so when it is eventually time to start pulling money out of your Roth IRA it is entirely tax free. Now that is an incredible opportunity.
Benefits of a Roth IRA
You could use this money to pay off any existing home mortgage payments, travel with your significant other, or to simply enjoy retirement without a worry about your personal finances. Luckily, since you are part of the best personal finance community online, Broke-Millionaire, we are going to ensure you have the right tools to succeed at growing your net worth, from now until the time you retire.
Maxing out your 401k
If you do not max out your 401k, then you are leaving free money on the table. Why do you want your employer to keep your hard-earned money? All companies match contributions at a different rate, but it is in your best interest to take advantage of this free money. I approach the 401k like it is a dividend paying stock, because every year you will get free money from your employer just like a dividend paying stock will pay you a set amount each quarter. Granite it is not free money after all, since I am sure you are a hard worker, but your employer’s contribution and the annual investment return of 7% makes contributing to your 401k well worth it.
Put the coffee or beer down and open up your 401k immediately! There is nothing I hate more than seeing a company absolutely rip off an employee who isn’t taking advantage of a 401k through their employer.
Create a Personal Financial Budget
Creating a personal budget allows you to take ownership over your financial destiny. It will allow you to track your daily, weekly, monthly, and yearly expenses. I update my personal budget every week to ensure I am up to date with my expenses. At first it may seem tedious, but within a few months when you start recognizing your expense that you can eliminate, it slowly starts to become an addicting game. If you have not read our previous post, Tip of the Day: Accept Frugality, then please do that immediately. That post breaks down the essence of creating a personal budget.
The Broke-Millionaire Budget
Our personal budget is easy to follow as we follow the 50/30/20 Principle. 50% of our monthly income goes to basic needs: Food, Water, Housing, Utilities, ect. 30% of our paycheck will go to discretionary spending: Dinner out with your significant others, picking up the bar tab for your best friends, Starbucks, you get the point. And lastly, the most important, 20% will go directly to our savings account. Creating a personal budget allows you to breakdown and monitor where each expense is coming from. It is a great resource for monitoring your net worth on a weekly and or monthly basis.
Open Up A Credit Card
Most Americans do not have a credit card, which is absolutely mind blowing if you ask any of us here at Broke-Millionaire. Why you need a credit card? Your credit card is your secret key to unlocking so much more in your financial destiny. For real though, building up a credit score is paramount to your future success. Your credit score is what banks use to calculate whither you qualify for a loan or not. If you ever want to own a business or buy a home, then start now.
However, the key to credit cards is to not go overboard. Currently, I have three Credit Cards. Do I max these out each month? Absolutely not! In fact, I only spend an amount that I know I can pay off. Only spending the amount, you can pay off is crucial, because it allows you to show reputation in paying off debt, which in return builds up your reliability and credit score.
Invest In The Stock Market
I am sure you have been told investing is hard, but that could not be farther from the truth. Heck open a Robinhood account and you can start investing with legit $1. The point is, investing is the single greatest asset you can use to increase your net worth each year. The market on average returns 7-8% each year. That is phenomenal for doing absolutely nothing. Follow our Broke-Millionaire strategy, which is hands off and completely automated. Each month, Vanguard takes a certain amount from my savings and invests it into safe index funds. Again, I know it is intimidating. You will be thankful in about 10 years when you realize how much your money has compounded.