Back to Basics: Building a stress-free financial life

Back to Basics: Building a stress-free financial life

As the next generation grows up in a world that continues to advance technologically, it is important to educate our kids on basic financial principles that they won’t necessarily be taught online or in school. Every day they are bombarded with ads and influencers all vying for their time, attention, and wallet. As it gets easier to spend with the click of a button on our phones, it is up to us to teach our children good financial habits at a young age so they can begin to build a stress-free financial life from thestart.

Budgeting

Having a budget can help keep your spending in check and hold you accountable when lifestyle creep comes into play. Budgeting can not only save you from overspending on “wants” but can help keep you from incurring unwanted and accidental debt. There are many ways to budget your money and some may be more beneficial at different stages of your life. I believe one common and effective strategy is the 50/30/20 rule.

• Spend 50% on needs: rent, car payments, groceries, utilities
• Spend 30% on wants: shopping, vacations, streaming services, gym memberships
• Save the last 20% for future unexpected spending, emergencies, and retirement

Handling Debt

Many young people grow up with knowledge that their Gen X or Millennial parents have spent a good portion of their adult lives in student loan debt. Credit card debt also has a way of creeping up and can often be challenging to pay down. Paying off credit card balances in full at the end of every month is a great way to help ensure you are not overspending and paying an outlandish amount of interest on purchases both great and small. While the idea of potential credit card debt can be ominous, having small, payable debts is important to building credit and being able to take out mortgages and loans for larger financial purchases later in life.

UnderstandingCredit Scores

Building a good credit score can feel like climbing a giant mountain that holds a great amount of power over future expenses like buying a home or a new car. That three-digit number can affect nearly every facet of your financial life and makes it easier to achieve important milestones with easier borrowing at lower interest rates. Credit scores are used to understand an individual’s spending behavior and helps credit unions determine how likely you are to pay back a loan on time based on information from your credit reports. To keep your credit score higher, it is important to set high standards for yourself and purpose to pay your debts in full each month on time. It also means being cognizant of credit limits and keeping your debt to spending ratio low.

Helping the next generation understand basic financial principles will have positive economic implications for all of us as we move forward with responsible spending and saving. We always appreciate the opportunity to speak with our younger clients to help them understand finances from the start. Talk to us one-on-one about how we can set up a meeting with your whole family to help you build sustainable, generational wealth.