Money is never a comfortable subject; especially so these days when it just seems so hard to simply save money. Expenses rack up, credit cards start piling up—and the urge to always be doing something is pretty strong. I know, for me, living in New York City where there’s just always something to do (or somewhere new eat), I’ve got this constant sense of FOMO (fear of missing out). I just want to do it all. And I don’t mind spending to do it.
That sentiment jives with recent trends for the tourism industry as well. We crave experiences over objects. But when trying new experiences, we’re often more than happy to shell out the cash to make it happen.
While “living in the moment” is a perfectly acceptable way to enjoy life, it’s still also important to simultaneously prepare for the future. It’s something I’m continually worried about and increasingly focusing on. Because as rough as the world might seem right now, it’s not really ever going to get any easier. Better to prepare now.
How To Financially Prepare for the Future
1. Start planning (and saving) early
It’s never too soon to start thinking about the future—especially your financial future. All those life expenses (graduate school, marriage, home ownership, retirement), they all cost a lot of money. As soon as you’re able, it’s smart to start saving as early as you can. Even if it’s $5/month or a flat amount at the end of the year.
Even the simplest steps you take to save money will be helpful. Open a savings account and put money away as often as you can. Try to pay down your high-interest credit card debt, and when you’ve got a decent income, try to avoid splurging too often. Save what you can.
It’s important to have some savings available for emergencies and unexpected costs. We’ve all seen those GoFundMe accounts for emergencies. Most personal finance experts recommend to have 3-6 months living costs put away in a savings account for emergency situations. You never know when an unexpected bill or problem might come up!
Keeping and adding to an emergency fund isn’t always easy or possible for all of us, of course. When I moved to NYC, I knew things would be tight at first so I tried to save up what I expected three months rent to cost—just to hold me over while I transitioned into a new life, refreshed career, and expensive habits.
2. Create (and stick to!) a budget
Budgeting can and will help with managing your personal finances. It’s a matter of knowing how and where you spend your income each month. Personally, I find budgeting to be a tricky habit to pick up. Keeping track of all the odds and ends of my life takes time, but there are plenty of finance apps for budgeting out there.
It’s not easy to track a budget, but if you’re able to watch what you spend for a full three months or so, you’ll have a good idea of where you typically spend your money.
Once you know where your money is going, you can then create a budget. When you’ve learned what you spend and where, you can adjust as needed to make sure you build in a savings plan. Stick to it by maintaining regularity with your spending.
My checking account through Bank of America notifies me each month how much I’ve spent in various expense categories. When I see I’ve gone “over-budget” on something (usually bars & restaurants), I can then more closely monitor the next month’s expenses to try and keep it under control.
A budget is simply a guide and it’s not the end-all, be-all, but once you start regularly monitoring your money, it’s a lot easier to prepare for the future. Knowledge is power.
3. Manage your expenses
Once you’ve got an established monthly budget for income and expenses, you can start to plan for the future by slightly reducing your costs and adjusting your expenses. You may be surprised how easy it is to buy “little” things that add up. Yeah, the typical example used by personal finance experts is that a $4 coffee every day adds up to a lot in a year.
And while that’s true, cutting out specialty coffees to save money isn’t necessarily the best option. Don’t just become a hermit and avoid spending *any* money just to save a little. It’s still important to live.
It’s helpful to set a savings goal. Make sure you’ve got your emergency savings and then when you’re working toward a bigger expense—such as a vacation, a home, education, or a marriage—you’ve got to keep track and work toward it. Simple math and looking at a calendar will help you plan so you can achieve your financial goals.
4. Know and understand the financial lingo
With a little bit of reading online (or browsing financial books), you can learn a lot about personal finance. It’s important to know and understand certain financial lingo.
Unfortunately we don’t learn a lot about personal finance in our basic education system in the US, but when you understand how the industry works, you can certainly go further than otherwise.
Look for tips and information from personal finance blogs, and learn the financial terminology so you can better prepare your own finances.
5. Talk about money!
Talking about money is never easy—even with your loved ones. But part of preparing for your financial future is to also being willing to openly discuss your individual and shared goals. Keep an open dialogue with friends, family, and partners about money and you’ll all be better off.
One of my biggest pet peeves is the secrecy we all keep around our financial situation—our salaries, our savings, our debt, our expenses. If we were all a bit more honest and open, we’d all better be able to manage our finances in healthier ways.
In relationships, it’s important to discuss money so that you can better plan for a shared future. There are endless options for working to achieve your financial goals—and with honesty and compromise, you can effectively plan for the life you want to live. But you’ve got to talk!
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Money is a part of all of our lives all day, every day. It’s inescapable. And, unfortunately, if you’re like me—you’re probably not quite ready to be saving for a healthy financial future. But a few easy steps like I’ve outlined above can certainly help. I know it’s worked to get me better at saving and preparing. There’s a lot more to do, but these basic first steps will help set you on a safe path to a healthy future.