Reason #5: Time for a Money Diet?

Even though I stated earlier my finance job does not exactly correlate with my interest in health and wellness, a little money knowledge can go a long way! Accumulating credit card debt and other money issues can cause enormous amounts of stress that can be prevented. Below is a list of simple financial advice that experts from cnnmoney.com state is “the best financial advice ever.”

"No matter how much or how little you make, always save a little bit."
It's a reminder that whatever money comes into your life, you can (and should) be setting aside some of it. I know many of you are saying “how can I save in NYC while making $40,000 a year?” Tips include diverting 10 percent of your income to savings before anything else and if (when) you get a raise, putting the difference into savings, and living on your pre-raise paycheck.

"Save hard for the first 10 years of your adult life."
The advice is to save as much as you can for the first 10 years you begin working. Or another similar statement is to keep living like a broke college student for as long as you can. During your young 20s, you a) have more time to bargain shop, b) can share rent with a roommate or possibly live at home with your parents for free (or at a reduced rent), c) are most likely childless and most likely have yourself as the only expense, and d) can let the power of compounding* make you wealthy!

Sure your 20s are notoriously the time you are broke, especially if you live in NYC (Rent at $1500/month is considered a great deal? $12 for a glass of wine?), but regardless, in the long run it will be worth it to save. Good ideas to save include: Research purchases, wait to buy items on sale, learn how to do things yourselves (car repair, sewing, cooking, home maintenance, etc.), make lunch/dinner instead of buying it.

Compounding* is letting money make money for you:

Example: If 20-year-old Britney makes a one-time $5,000 contribution to her Roth IRA and earns an average 8% annual return, and if she never touches the money, that $5,000 will grow to $160,000 by the time she retires at age 65. But if she waits until she’s 39 to make her single investment, that $5,000 would only grow to $40,000. Time is the primary ingredient to the magic that is compounding.

Compounding can be made more powerful through regular investments. It’s great that a single $5,000 IRA contribution can grow to $160,000 in 45 years, but it’s even more exciting to see what happens when Britney makes saving a habit. If she contributes $5,000 annually to her Roth IRA for 45 years, and if she leaves the money to earn an average 8% return, her retirement savings will total over $1.93 million. A golden nest egg indeed! She will have more than eight times the amount she contributed. This is the power of compound returns.

"Know the difference between needs and wants."
Main message here is spend less than you earn. Go on a money diet! When you can't distinguish between real needs and mere wants, you're constantly talking yourself into spending too much. Im the first person to admit Im guilty of this, I am a sucker for a cute dresses, designer bags, and David Yurman jewelry. However, I have been noticing lately when I look in my closet and see dresses with the tags still on, am I really in need of them all? Do I really need two of the dresses in the same color?

Additionally, vanilla lattes from Starbucks are delicious (eh, Ive been known to have my share), but over $4??? Try to cut out of the latte habit – the money can add up (over $1,460 if you have one every day). The money can be spent on something worthwhile and memorable

"Buy quality."
Buy high-quality things at stores that stand behind what they sell. That way, if anything wore out or quit working before its time, you can take it back. You actually save money by buying things of higher quality that last than by getting cheap stuff you have to throw away in no time.

"If your outgo exceeds your income, your upkeep will be your downfall."
Live within your means or, more elaborately, be careful of adding new expenses to the ones you've already got. Ask yourself, am I putting out more than I'm taking in? If you are, realize you need to turn that around because it is unsustainable.

"Don't pay interest on anything that loses value."
Avoid credit card debt and borrow only to buy property or other assets that will appreciate. Try not to pay interest on anything but real estate. Save today for what you want tomorrow.

"Prince Charming isn't coming."
Start reading up on finance and investing so you are able to manage your own money. Barbara Stanny, author of three finance book for women states it best: 'Prince Charming isn't coming. To truly achieve financial security, your only protection is you. Prince Charming may leave, Prince Charming may die, and Prince Charmings aren’t always such great money managers. This advice isn't just for women, by the way…For the men, don’t be counting on your “Sugar Mama” to bail you out or that winning lottery ticket.

My personal advice with money: “Use money well, but do not waste it”
Watch your money, stash some away, and make sure you always have enough to sustain your living and enough for a safety net (6 months of living expenses). However, money can bring good things. Saving is a lot easier when there are occasional rewards (trips! dinners!) along the way.

What’s the best financial advice you have ever received?