What’s a financial tip that everyone should know?

Know Your Finances

You can't stick to a budget or know your finances in the dark. In order to have better control of your financial information, you need to have complete transparency. This makes it important to know the exact numbers so you can make budgets and plan ahead!

Define Your Financial Goals.

Before you can create an effective financial management system, you should first define your own financial goal. Otherwise, it would be hard to build the right financial mindset and habits without a goal to focus on. Often, when people are starting to learn personal finance management, they get so caught up with a lot of other things such as how to create a budget plan, the best investment strategies, saving schemes, and how to effectively use credit that they forget the most basic thing to know: their goals. While all of these things are important to learn, a person wouldn't really have a sense of what strategies or financial tools are best for them without defining what the end goal is. Is it for retirement? Is it for early financial independence? Is it to buy properties and assets? These are the questions that a person should ask themselves before focusing on other things.

Stick to a Budget

One financial tip that everyone should know is the importance of saving and budgeting. It can be easy to get caught up in the cycle of spending money as soon as it comes in, but establishing a budget and setting aside money for savings is crucial for financial stability and security. By keeping track of your income and expenses and setting aside a portion of your income for savings, you can ensure that you have a financial cushion in case of emergencies and be better prepared for the future. Additionally, regularly reviewing and adjusting your budget can help you make the most of your money and reach your financial goals more quickly. It's also a good idea to have a diverse savings portfolio, including both short-term and long-term goals, and to consider speaking with a financial advisor to get personalized advice.

Unclutter Your Expenses

Many of us are guilty of having unnecessary debits lurking around our accounts. It is a good idea to re-evaluate your fixed monthly expenses on memberships, subscriptions, and insurance. There may be memberships and subscriptions that you are paying for but not using anymore.

Insurance is another area that needs to be regularly updated according to lifestyle changes.

Cash Flow is More Important Than Income

Having gone through a period of financial hardship, I've discovered that most people forget that cash flow is more important than their income. Cash flow essentially refers to how much money goes out against how much comes in, which is crucial to maintain financial security and ensure debt does not accumulate. My tip for everyone would be to track your expenses carefully, watch out for high-interest products, and always save for a rainy day - having a safety net can make you feel secure in case of sudden, unexpected costs.

Reduce Taxable Income When You Can

You can potentially reduce your taxable income by taking advantage of the interest you pay on loans, such as a mortgage. By working with a CPA and reviewing your amortization schedule and interest payments, you may be able to lower your overall income and potentially move into a lower tax bracket. It's important to note that not all loan interest is tax-deductible, so it's crucial to consult with a tax professional to determine what you may be eligible to claim. Even if you have "necessary loans" such as a mortgage, it's worth considering how you can use the interest payments to your advantage and potentially reduce your taxable income.

The Compounding Effect

You can gain quick wins by investing in stocks, crypto, real estate, or anything else. Not all of them are accessible for all or will give you the desired effect. The only thing that will have the effect of compounding interest is investing. You can start with any amount, which makes it accessible to everyone. For example, if you have $100 invested in a high-yield savings account with a 5% annual interest rate, you will earn $5 in interest in the first year. If you leave that $5 in the account and continue earning interest on it, you will earn even more in the following year. This process continues, with your earnings building on themselves over time, resulting in exponential growth. The key to maximizing the benefits of the compounding effect is to start investing as early as possible and to be consistent in your investments. I wish I had known about this when I was younger.

Know Your Numbers!

As a small-business owner, I cannot stress the importance of knowing your numbers. What does that mean? Every week, read your financial reports. This helps you with the financial wellness of your business. I wish I had done this 11 years ago when I started. A few years ago, I began to make it a habit of knowing my P&L for the week, looking at my expenses, setting budgets, and monitoring transactions daily. It has completely transformed my business. Meet with your bookkeeper weekly. Meet with your accountant bi-monthly. Monitor every transaction. Revolutionize your relationship with money.

Pay Yourself First With Every Raise

When you get a pay raise, take 25% of it automatically and either increase your 401k contribution or have it automatically invested in a Roth IRA. You still have the other 75% of the raise to enjoy, and if you make the auto investment on your first paycheck, then you'll never miss it.

Pay Yourself First.

Always pay yourself first. This means that you should make sure you save a portion of your income before spending it on anything else. By setting aside a portion of your income each month, you can ensure that you're building up your savings and investing for the future.