With Father’s Day rapidly approaching (Sunday, June 15th), why not honor your dad by adhering to his old school financial rules? They were applicable then, and now:
Start saving early
My father emphasized this one over and over again, and then one more time (!) before I landed my first job as an editorial assistant at Inc. magazine: the sooner you start saving for retirement, the better. Here are some numbers that will incentivize you: If two people set aside $24,000 into their retirement savings over the years and one starts saving smaller amounts at age 25 and the other plays catch up with larger deposits starting at age 45, guess who comes out ahead? You got it! By the time they both reach 65, the person who started 20 years earlier comes out almost $40,000 richer than the late starter!
Budget, budget, budget
How much money is coming in the door? And how much is going out? You can’t begin to manage your finances until you have a sense of this. Now when I was growing up, there was only pen, paper, and calculator. Nowadays, there are management tools and apps like Mint which make this easier than ever: You can track your finances, budget, set goals and more. Plus, when you sync your various accounts-savings, checking, investments-you’ve got everything in one place, and that makes it easy to stay organized, do more with your money and ultimately achieve a better financial future, which is what my father wanted for me, and is likely what your father wants for you.
Spend less than you earn
The bottom line is that if you spend money you don’t have, you’ll get into debt. It’s as simple as that. And once you’re in the hole, you’re likely going to keep digging – deeper and deeper. That’s a recipe for disaster. Avoid this vicious cycle by being disciplined and using credit wisely.
Find affordable housing
No doubt, finding affordable housing is becoming increasingly challenging (In fact, a recent Harvard study shows that nationwide, half of all U.S. renters are now spending more than 30% of their income on rent.). That’s too high. Find a way to bring those costs down some how, some way so that they don’t exceed that 30% threshold, which is considered “affordable.” And if you can find a free option – at home with your parents, for example – that can work for a year or two (I did this for a while before moving into a small two bedroom with three roommates! We made do, somehow!)
Remember: money can’t buy happiness
Don’t fixate on becoming rich. After all, study after study shows that money really can’t buy happiness. Just find something you love to do, and do it to the best of your ability, per Dad’s suggestion.
Vera Gibbons, Mint Contributor and Personal Finance expert.