Learn why young people must value “avoiding common financial mistakes” if they desire to build wealth more effectively in the current economy…
During the past few months the creator of TheWealthIncreaser.com had numerous contacts with high school graduates, college graduates, those entering the workforce for the first time on a full time basis and those transitioning into a new line of work.
Many were enthusiastic and looking forward to striking out on their own and managing the affairs of life themselves.
In light of that enthusiasm and in a preventive measure to help them (and possibly you) avoid common mistakes or pitfalls that I have seen many young (and old) people make over the years–this discussion will primarily focus on what young people can do to ensure a more prosperous future and one where they can build wealth and avoid what has held back or delayed many as they pursued a more prosperous wealth building future.
In this hard hitting and to the point discussion TheWealthIncreaser.com will leave no doubt about the most pressing concerns that you should have–and act on at this time–if you desire to avoid common mistakes and build wealth effectively and efficiently–now and in your future.
Concern #1 not understanding your personal finances
It is important that you understand your personal finances in the simplest of terms and it can be made easy if you have the right approach.
You must know how to effectively create a personal budget or cash flow statement, a personal income statement, a personal balance sheet and it is important that you know your net worth so that you can build wealth effectively and at a faster pace.
Concern #2 underestimating your cost of living
In life interest rates will rise and fall, inflation will rear its ugly head and public policy within and without government will change.
You must know your cost of living on a monthly and annual basis and ensure upfront that you have the capacity to pay your monthly expenses based off of your monthly income.
If you are moving to a new state or country, be particularly aware of potential cost of living adjustments. Child care, health care, transportation, food and recreational expenses can vary from city to city and changing economic environments, therefore you want to know upfront if you need to get more income, cut expenses or more than likely do a combination of the two.
Concern #3 underestimating your housing costs
Your housing costs–whether you rent, have a mortgage, have a roommate or other living circumstances or arrangements–you must not underestimate or budget inappropriately as it will often put you in a deeper financial hole.
Over the years we have seen many who live aimlessly and juggle paying their bills as opposed to planning for their housing in a manner where they know they can affordably pay in a timely and consistent manner.
Even though your housing costs were included in the first two concerns listed above, they are included again as a separate concern due to the fact that your housing is normally the core of your monthly budget and it is important that you get your housing costs right on the front end.
Even though your housing expenses can be fixed if you rent or have a mortgage, there are variable expenses that can change such as your homeowners insurance, supplemental insurance such as flood or hurricane, property taxes and monthly utilities.
Concern #4 underestimating your taxes
If you are new to employment or are getting your first full-time employment you must adjust your w-4 to a level that allows you to meet your tax obligations. Furthermore, if you are a free lancer or work independently you must pay estimated taxes to ensure that your taxes remain current.
You cannot underestimate your tax payments and not have a feel for what your tax position will be in the coming years based on your employment at this time and changes that are expected in the future.
If you are moving to a new state be aware of taxation in that state and be prepared to make adjustments when and where necessary to reduce or eliminate your tax burden.
In the United States, nine states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming) have no income tax, however New Hampshire does tax investment income for tax revenue.
In addition you must consider taxes at the local and state level that may sometimes go by other names but are in effect taxation.
Concern #5 overestimating your job prospects
You must know your job prospects and your hourly or salaried wages that you will earn once you are gainfully employed. You must be able to distinguish among the various types of income and know the difference between what you gross (your total earnings) and what you net (your take home pay).
It is important that you know your skill level and the pay range that you can expect now and in the future. If you have to relocate can you do so in an effective manner and are you positioned to find a job at a pay grade that allows you to live at a desired level of comfort?
If your company downsizes and eliminates your position, do you have a plan? Be aware of unemployment laws and labor protections in your state as it will put you well ahead of most and put you in a better position for long-term success.
Whether you are generation x, y or z (or a millennial) you must put together a cohesive picture of who you want to be–at this time–so that you can truly see.
It is you who must create in your mind (and in writing) the pathway to the success that you really desire–so that you can reach higher!
By looking at (in a proactive manner) common mistakes that many young people have made over the years and preparing your mind with the right material at this time, you can avoid costly mistakes and build wealth in an effective and efficient manner so that you can move forward at a more prosperous pace.
By understanding how your personal finances work, properly determining your cost of living, addressing your housing needs and ability to afford prior to move-in, addressing your current and future tax position and determining how your job prospects will affect you now–and in your future–you can set yourself up for a more prosperous future.
Even if you have to move to a better location and tighten up your budget–the move could be worthwhile. Higher taxes in a better school district and area may push up your cost of living but it could be worthwhile if it offers you a better quality of life–and particularly if you plan on raising kids.
The wealth building success that you desire is predicated on you making a determined and highly dedicated effort at managing your finances in an intelligent, consistent and proactive manner so that you can build wealth, live the lifestyle that you desire and retire in comfort by knowing what you can and can’t do during your retirement years.
In the end, always remember that there are things that you can proactively do to facilitate making your dreams come true!
It is important that you realize that at the time the creator of TheWealthIncreaser.com entered into the workforce there was no avenue on the web that provided guidance of a significant nature as it relates to personal finance and building wealth effectively.
All the best as you avoid mistakes, refuse to put on the brakes and move rapidly toward your wealth building success by giving it your absolute best as you build a foundation that will pass any test…
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