Finances are a funny thing. You need to plan for now and you need to look ahead.
What’s worse is that the decisions you make today can set you up for success or failure just five years from now. So, what should you do now to ensure five-years-in-the-future you likes your financial decisions?
Here are 13 money tips that, five years from now, you’ll thank yourself for following.
Set a Budget and Stick To It
The first step to financial success: set a budget and stick to it. No matter how wealthy you may be, proceeding without a budget is a disaster waiting to happen.
The key: Set a budget that’s manageable and sustainable. The latter is likely the most important part because as the proverb (and Jack Nicholson’s character in “The Shining”) says, “All work and no play makes Jack a dull boy.”
We all know how that ended.
So, make sure you account for every single dollar you earn and include a little bit for fun stuff. Without the fun stuff, your budget becomes a burden and will be destined to die a slow death.
Make a Financial Plan
In your teens, 20s and 30s, thinking about your future may not be a priority. But it should be prime planning time.
Planning your financial future in your 20s can mean an extra million dollars or more in your retirement savings when you hang up your work attire for good.
The last thing you want to do is suddenly realize you’re 40 and you have no idea how you’ll retire in 25 years.
What’s more, if you start early — before you start making good money — you can get used to living a lifestyle that fits your budget and financial plan. Then, when you start earning more money, just stash that extra cash away like it was never even there.
Saving extra cash instead of significantly boosting your lifestyle may help you retire early.
Stick It Out With the Stock Market
The stock market is a volatile beast. Sometimes it surges. Sometimes it crashes.
The key to the stock market is to grab those reins and ride that bad boy like a cowboy on a bull. It’s going to do all it can to throw you off with its ups and downs, but if you can last those precious years on that bull, you’ll likely be rewarded for your long-term thinking.
The last thing you want to do is abort your ride the second the market slides a bit. Hang on tight. You’ll likely be happy you did so.
Open a Micro Investing Account
All this investing talk probably has you wondering where to start. Thanks to your smartphone, you can start with ease.
Numerous micro investing apps allow you to kick off your investing with as little as $5. Plus, many of them, like Stash, make investing even easier by grouping related stocks in easy-to-understand categories, like robotics, green energy and cybersecurity.
This makes investing easy, even for the inexperienced, and it makes it fun because you can easily invest in things you believe in. In five years, you could have several thousand dollars in investments working toward your retirement.
Maximize Your 401(k)
Decades ago, retirees could handle most of their bills in retirement with Social Security and pensions. This isn’t the case today.
Pensions are virtually non-existent in today’s workplace, and Social Security’s future looks uncertain. So, it’s up to you to craft your own future. Start by building a strong 401(k).
The key to a strong 401(k) is constant maximization until you reach the max contribution the IRS permits. Start by maximizing your employer’s match. For example, if your employer matches 100 percent of your contributions up to 4 percent of your salary, work toward having 4 percent of your salary sent to your 401(k). Once you hit that milestone, you can start working toward hitting that IRS contribution cap, which is $18,500 per year in 2018.
Maxing out means setting aside about $355 a week from your pay. For some, this may be impossible. If this is the case for you, only put away what your budget allows. Then, instead of buying that new car or the latest tech gadgets as you increase your earnings, push that extra cash into your 401(k) until you’ve hit that yearly maximum.
In five years, you’ll have a nice nest egg started.
Enroll in an IRA
Did you think your retirement plan ended with a 401(k)? Not quite.
Remember, your retirement is your time to enjoy life to its fullest, so you want to have as much cash as possible. You don’t want to spend it in a recliner watching “Wheel of Fortune” reruns — unless that’s your idea of fun.
So, after you’ve maxed out that 401(k), or if you don’t qualify for one because you’re a freelancer or your company doesn’t offer one, open an IRA.
Choose from the two types of IRAs — Roth or traditional. Each has its own benefits, and you should research what’s right for you.
Either way, work toward hitting the IRS yearly contribution limit of $5,500 for most families.
Establish Emergency Savings
An emergency fund marks a huge step in remaining debt free. Having this fund in place will eliminate — or at least mitigate — your debt by offering instant cash relief.
Most experts suggest at least a $1,000 emergency fund, then slowly building that to cover three-to-six months’ worth of bills. So, if your bills are $3,000 a month, you should have $9,000 to $18,000 saved for an emergency.
This may sound like a ton of cash, but if you lose your job or suddenly cannot work for some reason, this can help get you to greener pastures in the future.
One note: You may be tempted to throw this money into stocks to help gain some interest, but remember you need instant access to this cash, so it’s best to put it in an interest-bearing savings account.
Aim for a Remote Job
Driving to a day job causes wear and tear on your car, and requires you to pay for gasoline, babysitters for the kids (and the furry ones, too) and more. This can drain thousands of dollars per year from your pay. Not to mention how unhealthy a daily commute is for the human body and mind.
Why go through this when you can potentially work remotely?
Working remote can be extremely rewarding when you realize your commute is just a few feet and your kids’ toy cars are all that clog up your route to the office.
Plus, think of what you can do with all the money you’re saving by not driving to work — and with the time you’d normally be commuting.
Fortunately, it’s an option more and more employers are open to these days.
Eliminate Bad Debt
There are two types of debt: bad debt and not-so-bad debt.
Not-so-bad debt is for big things you generally cannot pay for outright, like cars, houses and college.
Bad debt is when you put impulse buys on a credit card without a payoff plan in place. You just keep paying that minimum balance and hoping the balance will just vanish one day.
But that 25 percent interest rate has another plan: It plans to haunt you for five or more years.
Instead of paying the minimums and sinking into the vicious debt circle, come up with a repayment plan. Try the avalanche or snowball debt-repayment methods.
In five years, you’ll be amazed how much you saved.
Try Rewards Credit Cards
Rewards credit cards reward you for paying for things you would normally buy.
Use them like cash. For example, use your rewards credit card to buy groceries, then immediately pay off that balance or pay it off in full when you receive the next statement. This will ensure you accrue no interest, but get all the points.
In five years, you may save enough points to exchange for a vacation or to buy something amazing that you typically couldn’t afford. Or to put toward your regular expenses.
Make Purchases Through Cash-Back Sites
Cash-back sites, like TopCashback and Ebates, are waiting to hand you cash for buying stuff.
There’s no fee to sign up and using them is easy. Cashback sites typically earn money through affiliate links, and they pay members a percentage of that money when they buy goods and services through the sites.
Cash-back values can range greatly, but they generally hover in the 1-to-5 percent range. Some have double cash-back days, where payments jump to 10 percent or more.
Check these sites before buying anything you need. You may be surprised just how much you can save using them. And if you let the money you get back sit in your account for five years, you may save hundreds or thousands of dollars.
Start a Side Hustle
Got spare time over the weekend or in the evening? Pick up a side hustle.
Whether you’re driving for Uber, doing odd jobs for Task Rabbit or writing articles on a topic you’re passionate about, this extra money can go toward your debt, savings or retirement. Or you can have fun with it.
Finding the perfect side hustle may take time and experimentation. But it can be worth some trial and error. In five years, you can stash thousands of extra dollars just working a few nights here and there.
What’s more, these gigs allow you to work when you want, so you’re not committing to a fixed schedule.
Learn a Valuable Skill
Take courses focused on your passion and see if you can earn a promotion, start a great side hustle or develop a new lucrative career.
Know that, to do this, you don’t have to spend thousands of dollars to enroll in a university. Many courses are free or are far cheaper than full-time tuition.
Also, many courses are also available online, so you may not even have to get out of your jammies to learn a skill that will help your bottom line.