We’re with you: the topic of personal finance, debt and investments may be sending chills down your spine—because who wants to read about that next to stories filled with beautiful things and dreamy destinations? But allow us to shift your perspective: Money talk can be a downer, but as many financially-savvy people know, it doesn’t have to. What if I gave you the key to guilt-free spending?
Get the 4-1-1 from the most money-wise people I know to show you how to see the fun in funds. Because like any armed and ready Beyhive member who’s ready to plunk down the dough when Beyoncé comes to town, it pays to be prepared when that once in a lifetime moment presents itself.
#1 Have a budget
A budget is NOT a death sentence. It is also NOT about depriving yourself. It is in fact a useful tool for setting yourself up for a lifetime of financial security. Your budget should reflect what you prioritize most in your life. You can enjoy little luxuries more when you know your hard-earned money has gone to things you truly value and has aligned with your life’s priorities.
If you’re looking for a benchmark, consider Alexa Van Tobel’s 50/20/30 rule. The Harvard Business School alum breaks it down to 50% for essentials like food, rent or mortgage and such, 20% for savings and investments, and 30% for lifestyle – dining out, travel, shopping and personal care.
Look at how much you can afford, review your history of expenses and start tracking your progress. Write it down or put it in a spreadsheet so you can immediately see where and when you are spending more than you should. That way you can scale it back.
#2 Pay your credit card in full
Former investment banker and now financial literacy advocate Rose Fres Fausto suggests the judicious use of credit cards. For her, it is best not to use a credit card to buy stuff or book a flight if one is unable to pay the amount due in full when the statement comes.
But what if you want to treat yourself for a job well done, and the cash isn’t here yet? Rose goes by this simple rule that she and her family members use as a yardstick for any luxury that they want to buy: “Buy luxury only if you can afford to buy 10 pieces of it.”
For Rose, having a healthy sense of self-esteem goes hand in hand with financial responsibility. “Our kids should know that their worth is not measured by the stuff that they post or the places that they go to.”
She adds, “There is a certain degree of joy when you finally get yourself that luxury after you’ve worked hard for it, after you’ve waited, compared to getting it prematurely, especially if purchased with credit card debt that you will carry forever because you can only afford to pay the minimum balance.”
#3 More than saving, start investing
“We should not stop at the first Basic Law of Money, which is to pay yourself first.”says Rose. “I advocate investing for everyone.” She explains further, “The money that you will put in equity/stocks should be your long-term funds. Money that you will need in 5, 10 or more years. This is the asset class that gives the highest return in the long run and so everyone must participate because we all have long term needs.”
#4 Get insurance
Most people are comfortable with pre-need plans, and that’s okay. While it shouldn’t be the main chunk of your holdings, its value lies in giving you peace of mind. Apart from your long term investments such as stocks and real estate, having medical insurance for health expenses, vehicle insurance for financial protection in the case of accidents and term life insurance to protect your dependents cushions the impact of unforeseen expenses in the short to medium term.
#5 Enjoy your money
Once you’ve set aside funds to secure your future, feel free to do as you please with your disposable income. The best investment was on improving herself.
What is left is what you can consider as your reward for being an extremely responsible woman who has already taken charge of her family and her future. Do what you will and do what you love with it. Life is a balancing act. We need to know when to enjoy it so that everything we do to prepare for those moments is worth every penny.
You should also be cautious about going all-out with luxuries, even if you can afford it. While he grew up being indulged in first class travel and almost limitless shopping as a child by doting grandparents, he realized that investments last longer and provide a more interesting and beneficial life experience.
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