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You might be familiar with the expression, “The love of money of money is the root of all evil.” While mismanaging money can yield stress and headaches, you do not have to maintain a love-hate viewpoint to money. By practicing these tips, you and your loved one can truly have a love-love relationship with money.
1. Live Within Your Means
Do you always feel like you need to have the latest phone, fanciest car, or take the most exotic vacation? While you might be the envy of all your friends, your wallet probably isn’t too happy. It is possible to have fun and enjoy life without spending every dollar you make.
Instead, spend less than you earn. With each paycheck, set aside the first portion to pay the monthly bills and try to save or invest 10% for the future. After those financial needs have been taken care of, any extra money is yours to spend. You can spend it all at once or spread it out over the month. Just remember, once all the money has been spent for the month, you wait until next month instead of borrowing.
Make a budget as a couple and take a few minutes once or twice during the month to ensure you are not overspending. It is okay if each person has a separate spending account, but, an agreement needs to be made on which account will pay the bills to prevent any miscommunication.
2. Pay Your Bills On Time
Although this next piece of advice might seem simple, too many people forget to do it. Pay your bills in full and on time each month. Missing a payment can have two potential consequences. The first is that you will be charged a late payment that can be a few dollars or $35 each time. Second, some loan and credit card payments are reported to the credit bureaus. If you miss a payment, your score will be penalized and the missed payment will remain on your record for seven years.
Designate one person to pay the bills and automate as much as possible so you do not forget to make a payment. Banks provide online bill pay for free. Using it can only help you.
3. Make Financial Goals
In a job interview, you might have been asked to describe where you planned to see yourself in five years. Just as you make plans to go on vacation and climb the corporate ladder, you need to also make money plans.
Take time to sit down with your loved one and discuss what you want to do in the upcoming years. Using a budgeting tools can help you calculate how much money you need to save. Your financial goals might include paying off your student loans by age 27 or having enough money to buy a house in 10 years.
4. Eliminate Debt
If you have debt payments, albeit student loans, a car loan, credit cards, or a home mortgage, make sure you make the minimum monthly payment each month to not get charged late fees or additional interest.
If you have extra money, try making an extra payment. It can be $50 or a double payment. Either way, you will repay your loans quicker and save hundreds or even thousands of dollars in interest. That means more money in your bank account that you can save for later.
If you don’t have extra money, then there are still a few options you have. For example, you could transfer your high interest credit card balance to a balance transfer credit card. Alternatively, you could stay away from credit cards by using a personal loan to lower the cost of your credit card debt. Either way the cost of the debt can be reduced which could expedite repayment.
Dual income households can try to use as much of the second income as possible to make the extra loan payments. Once all debts are paid in full, the second income can be deposited in a savings account or invested.
Do you want to know the best way to see your money grow? Invest it and earn passive income. By investing $100 a month for 30 years, you can $186,253 after an initial $5,000 investment with an average annual return of 8%. Over that timespan, you contribute $41,000 total and profit $145,253!
You won’t earn that rate of return by keeping your money in a bank account. Although it takes time to build a fortune, you will have a love-love relationship with your finances when you retire by investing as much as possible.
Another easy way to improve your financial relationship is to max out your employer 401k contributions. This is one of the few ways you can earn “free” money in your lifetime.
These suggestions can help you improve your financial relationship whether you are a single or in a relationship. Having a second person to manage your finances can be both rewarding and challenging at the same time. By agreeing on common goals, communicating your progress, and allowing your money to work for you, the path to establishing a love-love relationship with your finances becomes a lot easier.