Making smart financial moves is the dream of most people. Sometimes the way to increase your financial stability is not to work more but to make unique strategic decisions. Here are three of those smart financial tips.
This especially applies to people who are on a lower income, especially if you are living almost paycheck to paycheck. Building an emergency fund is one of the very first steps that you want to take in order to build a better financial future. Anywhere between $1000 and $10,000 is a good range to have for that emergency fund. This fund should only be for serious emergencies, like health emergencies.
Maybe you have to get some type of thing in your mouth for a tooth or are having some really bad cavities and you need a tooth pulled. Or maybe your car breaks down on your way to work, and you absolutely have to get to work in order to make more money. Those are the types of emergencies that fall under this category. It’s the first thing you want to do and can really alleviate a lot of pressure and a lot of stress in your life. The more you have in that fund the better, but $1000 is what experts like Don Gayhardt say would be the bare minimum.
It’s so important to fully understand the way that the tax system works. This includes federal taxes, state taxes, local taxes, property tax and capital gains. If you can understand the tax system, you can find these loopholes and legal ways to save thousands of dollars in taxes. Generally, this is something that nobody looks at except accountants. Most people give their reports to accountants at the end of the year, and they file it for them and they never look at it.
But if you’re proactive about this, you can save so much money by recognizing certain holes within the government that you can then use to save money on. This is why billionaire Warren Buffett says that he pays a lower percentage of his income in taxes than his secretary does. He’s making so much more money than her but he’s doing certain things that enable him to save a lot of money. So just take half a day to understand how the tax system works. It is going to benefit you so much over the course of your life by just understanding it.
During the previous recessions and even the great depression, unemployment rates skyrocketed. You want to think about a way to diversify your income so that you’re sort of protecting yourself in a situation like this. The economy might be doing very well at the moment, but things may not be the same a few years from now. It’s very difficult to predict the economy, so you want to think about ways that you can diversify this income. Maybe, you can create some type of side hustle or have a few rental properties that are paying you for being a landlord and making some more money.