Top 5 Financial Planning Tips No One Will Tell You

It is no secret that a lot of the world’s population are struggling with regards to finance at the moment. Wages are going up, but nowhere near as fast as prices are rising. Companies are trying to cut costs at all opportunities in order to accommodate for the rising prices, which results in less money for the employees of the company. It’s a vicious cycle of rising prices, cutting costs, and less money for employees, leaving a lot of people scraping the bottom of the barrel to pluck up their rent or mortgage money. But what can we do about it?

Yes, we could sit here patiently, getting by in life on the just the absolute bare necessities, and wait for the financial crisis to come to an end. Unfortunately, we could be waiting for a long time. Anyway, who wants to live a life where they’re constantly worrying about where their next meal is coming from? Sitting by and waiting for the storm to pass is simply not the best option here, we need to take action! But figuring out where to start with financial planning is a tough task.

There are a lot of tips on financial planning out there, most of them revolving around things I certainly do agree with. Things such as not wasting your money on unnecessary things like takeout meals, a load of beers every weekend (seriously, if you go out clubbing every weekend you end up spending $60 to $70, if you’re lucky, and wake up with only blurred memories and a horrific headache to show for it). Following this sort of advice is certainly useful, but it’s obvious. Here, we’re going to focus on the less obvious ways to save money and, hopefully, to live a more comfortable life in the future.

5 Save for Retirement

It’s a bit of a boring tip, I know, but saving for retirement is a must for anyone who is employed. I know it may seem like a bit of a backwards tip. You’re struggling for money now so how can you afford to put money into a retirement plan!? But it pays off in the future, unless you want to spend the final 20 years of your life working a minimum wage job to scrape by. If you want to spend your ‘free’ years doing what you always dreamed of doing, I suggest you start saving for retirement right now!

Many employers have a 401(k) plan that they offer to their employees. This is pretty much a down the line gold mine. You add in money to your 401(k) plan and you get a host of benefits from it. Firstly, you can add the money in before tax is taken, therefore reducing your taxable income. Alongside this, your earnings will grow without tax until you retire, earning you a decent amount in interest. Not only this, but many employers add in money to your plan when you do, the amount varies depending on your employer but it’s basically free money. For example, if you add in $100 a month, your employer might add in anywhere from 25% to 100% (or, more recently in the United Kingdom, 200%). This effectively doubles your money right away.

4 Pay Yourself Before You Pay Your Electricity Company

I don’t mean just your electricity company; it was just the first bill that came to mind. Basically, the point of this is that you should pay yourself before you start paying all the bills that are due. If you get your wages wired into your account and then begin paying out all your money on water, electricity, gas, rent or mortgage, food, and other such amenities, you will simply never save money. What will happen is that you will spend the money on things you actually need, like rent and electricity, then you will start thinking of other things you ‘need’ such as new shoes or a fancy dinner. You don’t need those things, and if your plan is to save some money up this isn’t the way to go about it.

What you should be doing is, as soon as your wages appear in your account, take a certain percentage of them and put it into a savings account. This is by far the most effective way of saving money I have come across. You pay yourself first, and then you pay out on all the things you need. It forces you to budget more effectively. Don’t get me wrong, if you need to pay an extra bill that month and you actually don’t have enough money to do so, you can take it out of your savings account, but the guilt you feel for ‘stealing’ from the savings account will stop you from making unnecessary purchases.

3 Investigate your Employer

Employers have all sorts of plans in place for their employees, and you would be advised to take full advantage of them. Chances are you feel undervalued and underpaid at your job, so take them for everything you can. If they’re offering you medical insurance with a huge discount, then take them up on it! We looked into this a bit earlier with the 401(k) retirement savings plan. But it doesn't stop there, many employers (large corporations especially) are required to provide a multitude of benefits to those who work for them.

These include Flexible Spending Accounts, which can offer huge savings on medical insurance, vacation plans, group insurance plans, staff discounts. These are all things that add to your savings little by little, and we all know what happens when you add a lot of small savings together.

Just as an example, where I work my employers are open for business on certain national holidays and Sundays. I try to work as many of these as possible because I get paid 1.5x my normal hourly rate for working a national holiday, and I also get an extra paid vacation day. This means I am basically getting paid 2.5x my normal hourly rate to do less work than usual (it is much quieter on national holidays).  Why would I not do it?

2 Eat Less Meat

I know, a bit of a different tip to all these employer benefits and savings accounts. But, when I made this change I started saving a huge amount on my weekly shopping bill. In fact, doing some mental arithmetic just now, I figured that going down from eating meat with almost every dinner to eating it just once or twice a week; I probably save around $1000 per year. That’s a fairly large sum of money.

Meat is the most expensive part of a person’s diet, I live in the United Kingdom, and two chicken breasts cost around £4, so about $7, this would feed me and my girlfriend for 2 meals each (if I’m frugal). On the other hand, a packet of chickpeas costs £1.50, so about $2.50, this lasts me and my girlfriend about 6 meals each. That’s a saving of $1.50 per person per meal. This adds up quickly.

No, you don’t have to worry about a healthy diet; it’s perfectly easy to get a healthy intake of protein with lentils, spinach and other such cheaper ingredients. Meat is not a necessary inclusion for every meal. So, if you can save about $1000 per year cutting down on your meat intake, what about if you stopped buying takeout meals and cooked more for yourself? Or if you took lunch to work every day rather than going to Starbucks? The savings you can get from shopping and eating more thoughtfully are huge, and I urge you all to start right away.

1 Budget!

I’m sorry, I know I said I wouldn't spout the obvious tips off, but this one is just too important to miss out. The reason it is obvious is because it’s by far the most effective way to manage your finances. Everybody thinks it’s a good idea but never implements it, I urge you to start using a budget plan right away if you’re serious about financial planning.

All you need to do is get your last few months bank statements right now, open up a spreadsheet (or use one of the many free budgeting apps for your smartphone or tablet) and start figuring your finances out. Calculate your exact income every month, which is pretty easy unless you have lots of income streams. Then, go through all your expenditures one by one. Put things like rent or mortgage, electricity bills, phone bills and stuff in one column, because these are constant. Then go through the rest of your transactions, including all the small ones that you forget about (they all add up). Start asking yourself “Was that necessary, did I really need to buy that” for every transaction. I guarantee that you will find a lot of places where you are leaking money. Cut these unnecessary expenditures out and start saving for the future!

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