Simple financial tips that will make your life's journey more pleasant

5 Big Financial Tips

by Omie Ismail


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If you want to move ahead financially and stay ahead for life, there are a few major financial decisions that you need to nail down and the sooner you get them right, the more likely they will make a huge difference in your lifestyle. Here are 5 major financial tips that will give you a leg up for the rest of your life:

1) Max Your 401(k) from 21 On

The moment you start working and qualify for a 401K program, you should max out on it. By the time you land your first "real" job, hopefully the only debt you have is a few student loans. So before you start spending your first paycheck, put away at least 15% of your income in a tax deferred account. It's a statistical fact of life that most Americans spend most of whatever they have in their hands. That's the nature of the beast and chances are that you're no different than the rest of us. So, the trick to saving is to keep the money out of reach. And because you've never gotten used to what your net paycheck is, start yourself out with a little less take home pay and you'll never know the difference. When you take into consideration tax savings, your net pay will only decline by ten percent. By the time you reach your forties, you'll have some comfort knowing that there is a six-figure account with your name on it.

2) Buy a Modest Home Early in Life

Many people will debate to death the whole rent versus buy argument. I was a happy renter for many, many years. But if you are planning on staying in an area for at least 10 years and you can get a house where the payment is about what you would pay in rent, buy it. Before you buy, put together a 20 percent downpayment and get your credit score well into the 700s and that should decrease your monthly cost. A home doesn't necessarily mean a house, and if the cost of a condo is the same as rent and that meets your needs, buy it. While the naysayers on housing will point to all the foreclosures, the vast majority of those are from purchases from 2005 to 2007 when housing prices went into an extreme bubble and were far, far above rents. If you plan to marry and have kids, buy into a good school district because the price of private schools is likely to continue to skyrocket.

Video: Are You Ready to Buy Your First Home?

3) Learn the Stock Market and Invest Very Young

The vast majority of Americans never invest in the stock of a single company. Most of them are content to put their money in the mutual funds offered by their 401(k) plans. And that's really a shame. The stock market has been a huge wealth generator for many people and increasing opportunities to prosper will come from investments in foreign companies. If your kids have graduated high school and they don't know the fundamentals of stocks, you haven't done your job educating them. The stock market benefits from compounding over time. Investments made during one's early 20s can become massive by mid-life. Sure, the markets will always go through declines, but on average, they produce returns of about ten percent over long periods of time.

Related: 4 Beginner Investment Mistakes

4) Learn How to Negotiate Your Salary

This skill is probably the most overlooked and under-discussed. I used to have a few people that worked for me that would never accept what I offered them for a raise. Every year, I had to battle with them but they were very good at their jobs and I was not about to lose them. They never got everything they wanted but they were able to inch up their salary a little more each year. Over a number of years, this added up to over $10,000 per year. Learn how to sell what you've accomplished and seek a higher salary each year. It may not be comfortable, but it can make a huge difference.

Related: What Can You Do To Increase Your Salary?

5) Set Goals and Measure Them

If you want to make progress, you need to have a goal, a plan and a way to track your progress. The most financially successful person that I know had a clear goal from the day he entered college. He knew exactly what he wanted to do. It was a fairly simple plan but he stayed focused on it and it all came down to execution. He stuck to the plan and it has paid off hugely for him. You may have different goals, but whatever they are get them down on paper and don't let others deter you. Once a quarter or yearly, try to see where you are versus your goals and make the necessary adjustments. If you've decided to live a simple life so that you can pursue your dreams in your work, then don't let someone that lives a lavish lifestyle convince you to switch course. On the other hand, if living large is your goal and it requires you to have high income, then stick with that plan and just live large as cheaply as you can!


Omie Ismal is an entrepreneur, financial advisor, and trusted financial advisor for family, friends, and colleagues. He has been a software CEO and an economist and regularly writes on investing, cost cutting, and family matters for LiveCheap.com.

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