Money is something that often carries a lot of emotions. When we have it we feel good about ourselves while when we dont we can feel deep shame. Money is something that few of us feel comfortable talking about and something we often fear asking questions about because we somehow feel we are supposed to have all the financial answers we need ahead of time. Here are some financial areas that are important to understand no matter if you are 10 or 110 and a good launching off point to knowing what you understand and what you may have to ask someone else to explain to you.
A budget is a written plan where you write down all the money you have coming in and all the money going out. While this is typically more complicated than you would think, budgeting is important and meaningful for us all. Budgeting allows us to understand our own financial health and make thoughtful choices. What do we need to save for? What expenses do we need to cut?
Debt is money that you owe someone else. Debt can be small amounts such as if you owe a friend a cup of coffee or large amounts if you are dealing with student loans, medical debt, or large credit card debts. This is where budgeting can play a role because if you know your debts you can find ways to pay them off, and seeing all your debts discourages you from getting more in debt by making poor purchasing choices. You might even think about refinancing your debt to allow for smaller repayments, for example if you visit https://www.sofi.com/refinance-student-loan/ you can find out how you can refinance your student loan debt. In addition being honest with your debts means you can often work with those you own money to create a repayment plan that is within your budget.
When we are struggling to keep our heads above water financially we find we need to reach out and ask for help. One such way is to become involved with mutual aid where community members help themselves. This is an old concept that can be found in communities across the world where members teamup to help themselves and not wait for outside donors to help. This means that those who participate in mutual aid funds do not feel shame around the fact that they need assistance, or develop an inflated ego because they can donate.
We all hope to retire at some point and it is never too early to start planning. A rule of thumb is to estimate your retirement expenses each year and multiply by 25. While what a retirement plan might look like for you may be very individualized the general tip is to save as much for retirement as you can as soon as you can. While retirement can feel very distant no plans might mean you can’t travel, pursue a passion, or see family and friends as often as you thought you would. And you can’t thoughtlessly rely on care programs like Medicaid, should you require long-term care when you’re older and don’t have the finances for your own healthcare. If you don’t plan ahead to start avoiding medicaid estate recovery then your children and grandchildren may have to say goodbye to the family home! If these don’t convince you to start planning ahead for your golden years, who knows what will.
Individual retirement accounts (IRAs) are retirement accounts with various tax benefits. For a traditional IRA, you can deduct contributions but will have to pay taxes on withdrawals when you retire. For a Roth IRA it is the opposite: your contribution isn’t tax-deductible, but qualified distributions are free of taxes and penalties. 401(k) plans are similar to IRAs but are set up by your employer instead of by you and some even come with employer matches and where these are offered you should always take advantage. 403(b) plans are the non profit and educational sector equivalent to 401(k).
Financial wisdom is not something you have to go on a long adventure and fight dragons to understand. Some parts of finance are easily picked up others are much more complex and need the help of professional financial planners to understand. No matter where you find yourself on your financial journey, know that you are not alone and there are always guides to help you reach your financial goals.
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Hey, I’m Rory and I am the ultimate accidental geek.
Born in London I was never interested in technologies until I started a part-time job at Apple and now I can’t get enough. Join me as a help you navigate the world of tech with some of my fellow geeks.