Small Financial Decisions You Can Make Today to Secure Your Future

smallsteps

You might not think that the small things you do today can have a big impact on your future. However, the truth is that seemingly small things can have a big impact when measured over time.

When figuring the course an airplane flies, it’s important to be precise. This is because being one degree off course can mean missing your landing target by several miles. You might not be off-target by much at first — perhaps only a hundred feet or so. However, if you keep following the wrong course, the longer you go, the farther off target you are. A small change, that one degree, makes a bigger difference the longer you travel.

The same is true of the small financial decisions you make right now. If you develop good habits now, and follow those good habits for years to come, the cumulative effects can be staggering. If you want to secure your financial future, here are a few small financial decisions that can add up to big results later:

Stop Spending on Unimportant Things

First of all, figure out what’s important to you. Then stop spending money on everything else. This requires that you determine your own values and priorities. It’s not a priority for me to have a large TV, so I haven’t bought one. I do like dinner and dancing with my husband on Valentine’s Day, so we spend our money on that.

Once you decide what’s important to you, and you stop spending on the unimportant things — no matter how small an expense it seems to be — you’ll be surprised at how much more money you have available to you. You might be surprised to discover how much you’re spending on things you really don’t care about. Stop, and the money will add up over time.

Invest a Set Amount Each Month

Take advantage of compound interest by investing. The younger you are when you start investing, the better off you’ll be in the long run, even if you can’t invest a lot. If you set aside $200 a month starting at 20, and do so until you are 60 years old, you can accomplish almost as much as if you set aside $400 a month from age 30 to 60 (assuming a 6 percent annualized return, compounded annually). Start 10 years earlier, and you can accomplish nearly the same thing, but with half the monthly financial outlay. Wait until you’re 40, and $800 a month won’t be enough to build the same nest egg.

The longer you have to take advantage of compound interest, the better off you’ll be. The seemingly-small change associated with investing any amount of money can pay off more than you expect over time.

Of course, it makes sense to increase what you set aside as your income rises. Boost your investment over time to keep pace with your income, and you will be even better prepared.

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Have a Plan for Your Money

Figure out what you want your money to accomplish for you. Some folks like to “give every dollar a job” so that they know where it all goes. I make sure my most important goals are funded (usually automatically) and then spend the rest on things and experiences I enjoy. The key is to have an idea of what you want your money to do for you, whether it’s ensuring a comfortable retirement, sending your kids to college, getting rid of debt, or allowing you time to travel.

Part of this plan also includes paying attention to timing with your finances. It may seem like a small thing, but knowing when your money is coming in and when the bills are due matters. Timing can mean the difference between just paying what you owe and being hit with an expensive late fee on top of everything else.

Make it a point to pay attention to your money, and have a plan for it, and, over time, it will add up to better financial security.

Image Credit: alexcotus

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  • http://www.spoonflower.com/profiles/captiveinflorida Jane Eskay Waldmann

    What 20 yr old has 200 a month to set aside, unless he’s a computer genius :)

    • Solace

      I was just thinking that $200 a month for investments—so that’s on top of emergency savings, student loan payments, etc.—sounds like quite a lot for a 20-year-old. I’m 23 and that’s a tough one.

      • http://www.twitter.com/bwfeldman Benjamin Feldman

        Yes, that is probably an overly optimistic amount! Especially considering many 20-year olds are still in college. However, saving whatever one can (while young) is going to be beneficial. Thanks for your comment!

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      Jane, that’s a good point. $200 may be an unrealistic amount for many 20-year olds to put away each month. However, luckily I think the underlying point – that anything you save when you’re young has a large impact – remains valid.

  • http://deardebt.com/ Dear Debt

    I think having a plan is so important — also setting priorities. Mine are getting rid of loans right now.

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      That’s great! Having a plan helps so much. Have you tried using ReadyForZero to manage your loan repayment? http://www.readyforzero.com

  • Retired By 40

    So True! QuikTrip Sodas – $0.79 for a 32oz really add up! Within the last couple of months I have had to crack down on myself buying these!

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      Yes, sometimes it’s the little things, isn’t it? I’m glad you’ve been able to crack down on the sodas!