Have you ever wondered about the impact of the ability to manage your money well on your well-being? The fact is that we usually learn little about money either at home or in our newly adopted country – and this is especially true for women. We begin our financial journey blinded, without a clear structure of how to act in what we have. But don’t worry, because financial education is here to save you and your financial future – both Investors abroada financial coaching platform for immigrant women and immigrants, explains.
Long-term financial success begins with basic education.
How do you feel about money? Lost, overwhelmed, paralyzed? It’s normal that when we don’t understand a topic, we tend to feel confused and have a lot of open questions. However, not facing your finances will not solve the problem, will not make you richer and will not give you a stronger financial future.
The truth is that financial education plays an important role in our daily monetary decisions. With the right knowledge, skills and tools, you can easily improve your financial reality. Here are three main ingredients:
1. Spend less than you earn
Start by creating a system where you will have a plan of your money at the beginning of each month. Think about the main categories where your money should go, and create different accounts to allocate a certain percentage to each.
For example, if you earn 4,000 euros a month, your monetary system might look like this:
- Account for essentials: 65% (pays your fixed costs) – 2600 euros
- Financial Freedom Account: 15% (builds your long-term investment) – 600 euros
- Play / fun account: 10% (to spend without regret – it’s your play money) – 400 euros
- Short- and medium-term financial goal: 5% (for example, savings on the initial payment for your first property) – 200 euros
- Emergency fund account: 5% (builds your financial security network) – 200 euros
Bonus: do you already have an emergency fund? Having a financial security network is one of the most important steps. Knowing that you are financially secure NOW is priceless. And yes, you can invest and build your own emergency fund at the same time!
2. Clear financial goals
If you don’t know where you’re going, how are you going to get there? If your money has a clear purpose, you win!
Here’s how to set clear financial goals:
- Take your time and set a date for the money – make it special.
- Write down your financial goals and think about why you want to achieve each one and what will happen if you don’t achieve them.
- Break your annual goal into months and then into weeks – it makes it easier.
3. Strategic investments
Once you start managing your money effectively and setting clear goals, you can start making money work for you! Yes, you can easily learn to do it and do it well by taking your finances into your own hands – but passively and on autopilot.
Let’s see what happens when you learn, build an investment plan and follow a strategy for investing your money in the long run. Let’s go back to our example: let’s say you are 30 years old, you have an available investment capital of 20,000 euros as an initial deposit and will contribute 600 euros every month for the next 25 years (remember that we set aside this amount for our financial freedom account ).
With an interest rate of 7% per year, your money can grow to a whopping 600,000 euros (excluding taxes on capital gains and inflation). In 25 years you will invest 200,000 euros out of your own pocket, and compound interest will give you 400,000 euros plus. If that doesn’t allow your money to work for you, I don’t know what.
The best part of the story? You did it yourself for very low fees, passively and automatically. You don’t need someone else to invest your money in you. You just have to learn the basics. Remember that at the moment you are only 55 years old. The plan should be followed.
Give yourself a 25-year head start
What does 2047 look like for you? How old will you be in 25 years? Would you be happy with the financial decisions you made in 2022? Maybe you didn’t save seriously, or didn’t invest, or spent money trying to impress people?
The good news is, today you have a 25-year handicap. And you can write a story. It all starts with educating yourself and taking responsibility for your financial future. You have it!
Automating your money plan is a surefire way to achieve your financial goals and enjoy life while your money runs in the background.
Whatever you do, whether you take your finances into your own hands or allow others to do it for you, ask important questions, such as what fees you will have to pay over the years, where your money goes (which companies support your money) and if you can really pick up your investment?
Want to take your finances and investments into your own hands? Join the seven-week fast training camp Investors Abroad Bootcampstarting May 30, 2022, to learn and build a strong financial future.