Budgeting, investing for retirement, eliminating debt, getting insured and staying on track with your finances are all necessary to have a financially stable future. Unfortunately, some people find it difficult to begin, let alone maintain, a financially healthy lifestyle. To help you get started, we spoke with 27 experts who shared their best financial advice.
Here is the best financial advice from the pros:
1. Learn How to Budget Effectively
Lidia Staron, Marketing Communications Specialist, Open Loans
Budgeting is probably the first tool that anyone needs to know. Budgeting allows you to know exactly how much money you can spend and save in a given month. It also helps you know where your money is headed, which is why it is so crucial that you begin the process of budgeting your income.
2. Keep Your Financial Plans Simple
Steve Penner, Founder, ProLedgers
Too many financial plans die on the table of over complexity. For example, are you using too many accounts or too many expense categories? Are you using bookkeeping software that does 100 things but you only need it to do 10 things? Do you have a process that is easy for you to use or should you be hiring a bookkeeper? Talk to an accountant or bookkeeper who understands your industry and can create a plan that is both simple and workable for your specific needs. As they say, “Plan your work and then work your plan.”
3. Adopt a Cash-only Payment System
Enrico Palmerino, CEO, Botkeeper
The secret to successful financial planning is moving from cards to cash. Put the credit cards and debit cards in an emergency-use-only case and move back in time to a cash-only system. Now, take your income each week and divide it into the budget categories that make sense for you such as savings, fun, household, groceries or dining out. Set the savings aside and place the remainder of the budgeted money in categories or using colored paper clips in your wallet and adhere to each category. If any money is left over at the end of the week in a category, you can either add it to savings or put it toward a goal like taking a vacation or buying a fun car. You’ll be shocked how fast you start saving money when you operate on an adhered to cash-only budget.
4. Know the Impact That New Accounts Have on Your Credit Score & History
Tracy Becker, President & CEO, North Shore Advisory Inc.
Each time you get a new account that is added to your credit profile, you’re reducing your average age of credit. If you apply to new credit card offers this can have a big impact on scores quickly. Account age can be a major factor in your FICO credit scores. We have seen scores drop 60 to 100 points from opening two revolving accounts within a few months of each other. The higher the credit score, the more it drops. Consumers should be careful about how often they open accounts, especially if they will be applying for a mortgage or other large loans in the next few years. If the score drops too far, it can land them below the threshold to qualify or cause a substantial increase in the interest rate.
5. Start Your Retirement Planning Early
Alika Cooper, Business Development Manager, Cogneesol
If you are thinking of retirement or reached the point where you want to sell your business in order to enjoy the rest of your life, then remember one thing, “Timing is everything.” Entrepreneurs work hard all their life and put their best efforts to build a sustainable business but, in the end, you will succeed only if you sell it out with profits. So, you need to diversify your investment portfolio and plan diligently right from age 20. Have the right retirement plan in hand. But, in case it doesn’t work well, have a plan B so that nothing can drag you down at the age of 60. There are many more other factors that can make you enjoy retirement, and these are some of the important tips one should consider.
6. Follow the Three Keys to Investing
Ryan Repko, Financial Advisor, Ruedi Wealth Management
There are three keys to investing that anyone can follow, regardless of their financial acumen: start early, keep your costs low and diversify globally. The earlier you start investing, the longer your money has to compound, which is what ultimately creates wealth after several decades of investment. Keeping your costs low seems obvious, but if your portfolio costs over 0.5 percent, you will have a significant drag that reduces your return. Finally, you must be diversified globally because countries have different business cycles and investment performance. Diversifying across multiple countries can help smooth out the ups and downs of your investment portfolio.
7. Make Sure to Plan for the Three Phases of Retirement
Scott Wardell, Wealth Advisor & Author, Thrivent
The first phase is where people are typically healthier and more able to travel, which we referred to as the “go-go” years. Here, you have to have extra money allocated for the fun stuff. The second phase is the “slow-go” years and, although you probably won’t be traveling as much, there are things that you might want to pay for instead of doing it yourself. Finally, you need to be prepared for the “no-go” years where you have possible long-term care expenses.
8. Build an Emergency Fund
Alayna Pehrson, Financial Blog Manager, BestCompany
Regardless of how detailed your budget is, you should always have an emergency fund to fall back on because you never know when you might need it. Everyone can fall victim to medical emergencies, home repairs, car repairs, job loss and other unexpected expenses. Having an emergency fund to rely on can save someone from experiencing financial turmoil. It’s best to save around three to nine months’ worth of living expenses in your emergency fund, but do what you can with what you currently have. Even if you are a college student, having even a little money in your emergency fund is a good idea. Be prepared — always.
9. Get Rid of Debt as Soon as Possible
Drew Parker, Creator, The Complete Retirement Planner
Debt that is ever-present can be stressful and a significant threat to your financial security. Not only do interest charges continually increase the cost of what has already been purchased, but required monthly payments restrict your ability to use that money more productively. For example, a $200 monthly payment on a $5,000 credit card balance (with 18 percent interest), would take 11 years to pay off, and cost $2,870 in interest charges. Investing $200 per month for 11 years (with a 7 percent return), would result in almost $40,000. After 11 years, would you rather lose $2,870 and have no cash in hand, or make $13,600 on your $26,400 savings, and have $40,000 in hand? Pay off your debt as soon as possible, relieve that stress and give yourself the best opportunity to control your destiny and achieve financial success.
10. Choose a Financial Advisor Whom You’re Comfortable With
Margaret M. Koosa, CEO, The Alchemists
As you choose a financial advisor or planner, make sure that you’re comfortable working with and learning from whomever you pick. You need to ask questions when you do not understand or want clarification. Too often, people aren’t comfortable asking questions regarding their finances because they don’t want to appear ignorant. Developing a financial plan is a comprehensive process. Every bit of your financial life should be addressed, including retirement savings, nonqualified investments, education planning, tax planning, bank accounts, employer benefits, life insurance, disability insurance, home and auto insurance and cash flow analysis.
11. Automate Your Investment Program
Byron Ellis, Certified Financial Planner & Founder, Doing Money Right
Automate your savings by setting up a payroll deduction or monthly movement from cash to investments. Automate your investments by hiring someone to keep track of them or using mutual funds or money managers. Take advantage of your company retirement plan or stock purchase program if you have one. In all cases, you make a decision once and things go from there. The more you set on autopilot, the smaller the likelihood that your behavior will mess things up. Don’t get in the way of your success.
12. Track Your Spending Habits
Julia Carlson, Founder & CEO, Financial Freedom Wealth Management
Most people who are new to financial planning have no idea where their money is going, which is why it’s recommended to keep track of your spending habits. Record all expenses using a handy method to track your finances, such as an app on your smart device. This gives you an idea of where your money is going. The next step is to decide where your money should go, instead of just observing where it went. This can be done by listing your expected income and your expected expenses. Finally, spend your money the way your budget has allocated it, and you will be on your way to a healthy financial life.
13. Make Sure to Have Medical & Health Insurance
Lisa Zamosky, Senior Director of Consumer Affairs, eHealth
The cost of a two-hour visit to the emergency room can run well over a thousand dollars, even without special laboratory tests. If you have an unexpected injury or illness and get confined at the hospital for several days, your bills can run into the tens of thousands of dollars easily. Unless you have a huge emergency fund for medical care, you’re well on your way to bankruptcy. Health insurance puts a limit on your financial liability. You can also check if you qualify for government subsidies to lower your health insurance premiums effectively.
14. Be Sure to Have Adequate Life Insurance
Lingke Wang, Co-founder, Ethos
Make sure you have adequate life insurance that isn’t tied to your employer. You don’t know where you’ll be 10 years from now, but you do know that life insurance will cost you more in the future than it will right now. There’s nothing wrong with having more than one policy, so if your employer offers free life insurance, take it. Also, buy a term life insurance policy while you are young and rates are at a 20-year low — whole life insurance isn’t a good investment. Get a simple term policy. Invest the difference in premiums in a low-fee mutual fund or put it into your 401(k).
15. Focus on Building Streams of Cash vs. Piles of Cash
Shawn Breyer, Owner, Breyer Home Buyers
Buy rental real estate to create streams of monthly income that will build your nest egg instead of going through the traditional route of working your whole life to build a nest egg that will provide you with streams of rationed cash for your retirement. It’s a lot easier to build $5,000 in monthly rental property income than it is to save millions of dollars to create a $5,000-per-month ration.
16. Seek Professional Guidance on Growth & Protection Solutions
Erin Meijer, Director of Thought Leadership, Guardian
While it’s important to seek advice on investments, it’s equally essential to learn about protection strategies. Find a financial advisor who truly understands you and can help you create a balance between protection and growth solutions to achieve your goals. Work with a financial advisor who can provide a detailed and easy to understand financial plan to help increase your overall financial confidence.
17. Know Your Retirement Goals
Aviva Pinto, CDFA & Director, Bronfman Rothschild
One of the most important financial tips to help you live a financially healthy future is to know what your retirement goals are. What will your after-tax spending be when you retire? Will you be living in another state during retirement? At what age do you and your spouse plan to retire?
What is your and your spouse’s life expectancy? Knowing the answers to these questions, along with your income and expenses information, will help you create the right financial roadmap for your future.
18. Avoid Debt & Pay Your Bills on Time
Benny Ganatra, CEO, Americor
The best advice young people and those approaching retirement can receive about financial planning is to take a proactive role in your financial education and avoid putting yourself into debt. If you have to take out loans and credit cards, always make payments on time that are greater than the minimum amount so you can work toward reducing your debt while building your credit. By avoiding debt you can make better contributions to your retirement fund, and that is important for long-term financial planning.
19. Invest in Stocks from Companies with Growing Dividends
Joseph Sroka, Chief Investment Officer, NovaPoint Capital LLC
One area that can provide a lifetime of rising income is to invest in companies with growing dividends. They can provide a growing stream of cash flow, higher than the rate of inflation, which preserve purchasing power in the future. Identifying high-quality investments that you can own for the long-term may seem boring, but time shows us that this is a logical approach. Forgo owning the hot stock at the cocktail party and own some consistent dividend growers so you can toast your smart investment decisions well into retirement.
20. Diversify Your Investments to Mitigate Risk
Adam Jusko, Founder & CEO, ProudMoney
Diversifying your investments is incredibly important to manage risk. When you invest in just one stock, or just one industry or any other single investment, you have the potential to lose a large amount of money in a short amount of time. If one stock goes down 25 percent and that is your only investment, you’ve just lost a quarter of your money. When you are diversified into many different types of investments and different types of companies, your portfolio will never be sunk by one single investment that goes bad because it will be balanced out by other investments that have done well. Diversification is especially important as you near retirement age because you don’t want to take big risks with money that you will soon need to access for your everyday living expenses.
21. Invest in Real Estate Through REITs
Derek Moore, Founder & President, Razor Wealth Management
As a primary residence, it [real estate] can offer some ability to build equity in an asset. However, one thing to keep in mind is generally real estate is considered nonliquid in that you may not be able to sell right away and convert into cash. For those who want exposure to real estate, real estate investment trusts may offer a way to invest in that market without the headaches of owning multiple properties and dealing with renters. It also may be a good way to understand the different spaces in the real estate market and how sensitive these areas are to changes in the economy or business environment.
22. Switch to a Digital Business Bank to Save on Bank Fees
Brian Hamilton, Founder & CEO, Azlo
Any idea how much in bank fees you’re paying each month? Most customers don’t realize how much money bank services are costing them. Paying for unnecessary fees like foreign transactions can be a major inhibitor for growing a small business. Avoid this cost by switching to a digital business bank with zero fees and no minimums, including no fees for domestic and international payments, bill pay, mobile check deposit and digital invoicing.
23. Make Sure to Maintain Good Credit
Robert W Linkonis Sr., President, Credit Restoration Associates
Make sure that you know your credit scores and what is on your credit reports. You want to make sure that your credit is good so that you will be able to take advantage of opportunities when they present themselves. Financial planning involves using wisdom to get from where you are to where you want to be in retirement. Without good credit, you will not be able to take advantage of the lowest interest rates for major purchases such as real estate or automobiles. By not getting the lowest interest rates, you are not able to maximize your financial planning. If you need professional help with your credit, seek a licensed and bonded credit repair organization.
24. Take Advantage of Flexible Job Opportunities
Adam Roseman, Co-founder & CEO, Steady
People are struggling to fund unexpected expenses, save for retirement and pay off loans. Picking up more work is the most sustainable way to build income and, when paired with financial discipline, can be the best way to take control of your financial future. The nature of work is changing from full-time to part-time and contingent. Take advantage of the flexible job opportunities that fit your schedule and skill set. You deserve to meet your financial goals and pursuing personalized extra income-generating opportunities is a surefire way to get there.
25. Let Time & Compounding Work to Your Advantage
Francis Tapon, Chief Investment Officer & Professor, Emperor Investments
When it comes to investing, the adage “patience is a virtue” is even more important to remember. A young investor has a major advantage over older investors — his or her young age and the time runway this provides. All it takes to retire wealthy is to invest in a solid equity portfolio made up of great companies and to let the dividend stream compound through reinvestment during the next 40 years or more. So, the secret is to let time and compounding work their magic. Don’t panic in a market downturn. People tend to sell their investments at the wrong time. If you’re invested in great quality companies, look at a downturn as an opportunity to buy more, or as Warren Buffett once put it, be like a mosquito in a nudist camp.
26. Consider Starting a Side Hustle Business
Jarred Kessler, CEO & Co-founder, EasyKnock
Side hustles are a great way to diversify income and provide opportunities to earn extra income. This results to a safety net which allows for the coverage of unexpected expenses. This, in turn, reduces the likelihood of accruing debt and staying on a steady financial track.
27. Get Funding & Increase Your Company Value
Tomas Milar, CEO, IncParadise
The only way you can succeed is if you are able to secure funding to grow your company and the company’s value. Many options for small business funding is available in the market, but you would need to carefully research and have a clear business plan in your mind before you would find the right one for your business as well as for yourself.
The Bottom Line
It takes a lot of patience, courage, and perseverance to live a financially healthy lifestyle. If you want to have a financially secure future, it’s important to begin now. While it can be challenging at first, the habit of making financially sound decisions is not difficult to learn and maintain. Use the above best financial advice from the pros to get you started.