Contrary to popular belief, a lot of people who are viewed as ‘broke’ actually have regular, good paying 9-5 jobs. The issue isn’t if they’re earning enough money, the issue is how they’re spending it. With how rampant financial illiteracy is, many of us go about without a clue as to what to do with our money. This changes today. You deserve to live a financially abundant lifestyle and these principles will help you get there. But before getting into today’s topic, do hit that like button and subscribe if you haven’t. Now let’s begin, shall we?
14. Understand your current financial situation Before you can begin your money management journey, you need a clear picture of your finances. This includes identifying what your assets are and what kinds of liabilities you possess; the latter being - what you want to stay clear of. While it may be overwhelming at first, you can easily find free websites and apps that can do all the heavy-duty work for you. In them you can add how much money you have (for example, how much money you make each month), then you take a look at your bank statements and add in all the expenses you’ve made. These sites can help you identify where you’re wasting money or which areas you need to spend more in – this will be personalized based on whatever financial goals you have. You’ll be surprised to see all the ways you can save, instantly. Along with this, you can also get in touch with a financial advisor who can guide you to your goal of financial freedom.
13. Set goals
There’s no point in earning and saving money just for the sake of earning and saving money. You need goals. This is what will motivate you to work harder. Think of your goals as a map; you have circled your final destination but on the way, you keep checking in at goal posts along the way. With your current finances in mind, you should identify what steps you need to take in order to make however much you need. Ensure you have a good mix of short-term and long-term goals and each month take inventory of how much closer you’re getting. This will encourage you to save more and spend less because now you have a clear objective in mind.
12. Make a budget
Now that you have your goals, one vital step you need for success is a budget. Without this, you’ll be more inclined to spend your money frivolously. Each month write down how much you’re bringing in and then create multiple columns for payments you need to make (i.e. rent, groceries, electricity, gas, etc.) For many of these categories, you can turn to automatic payments – I think these are a life saver because not only are you free from the anxiety of ‘oh my did I pay rent this month?!’ but, you also have less money at hand to blow away. A budget will also show you where you’re losing money like for example, multiple streaming subscriptions or regular takeaway meals. You need discipline to achieve financial freedom and a budget is one way to do it.
11. Get comfortable with being uncomfortable As creatures of habit, we get very comfortable with whatever we have. This, by the way, is despite the fact that we feel, or rather know, that there is something much better out there for us. Getting out of our comfort zone takes a lot of mental and physical strength, so much so that many people give up just by thinking about the challenge. You need to take challenges head-on. There’s only so much money and so much difference you can make in your life by living the way you are right now. Find new ventures and opportunities and take a risk. Prove to yourself that you have the guts to get what you desire.
10. Establish an emergency fund You have to protect yourself when stuff happens. Your financial foundation can help you not fall into some bad financial pitfall. Keeping an emergency fund for rainy days helps you prepare for crises before they happen. If you do not set up an emergency fund, you may find yourself in a financial crisis. It doesn’t matter how much you make, as long as you make it a rule to always keep aside 10% for emergency savings. Think of it as paying yourself and safeguarding your portfolio in case of any impromptu needs or emergencies.
9. Cut Expenses
This calls back to the point about budgeting. When you get a transparent insight on where your money is going, it may shock you to see some of your mindless expenses. A splurge here and there, a coffee date once in a while is allowed – after all, you need to enjoy your money. But you need to be mindful of places you need to extensively cut back on. Now, nobody can tell where you need to cut back because this is dependent on everyone’s personal goals, but this much is true: any expense made outside your budget, made impulsively needs to be stopped immediately. There are two main types of expenses in your budget: fixed and flexible. Fixed expenses are things that cost the same every month, such as your rent or car payment. Flexible expenses are those that vary from month to month, such as gas and groceries. To save as much as possible, you need to look at both types of expenses. Flexible expenses are usually easier to cut since they don’t require major lifestyle changes. However, you can often find greater savings by cutting back on fixed expenses since these are some of the biggest items in your budget. For instance, finding an apartment that costs $300 less a month will help in the savings department much more than cutting out a few coffees a month.
8. Saving and investing a little money every month We’ve just discussed your emergency fund – that is a form of saving. There are other kinds of savings you can do to help yourself. A retirement fund, for example, is vital for most of us. Many have a retirement fund set up automatically by their employer. There is also the literal form of saving where you’re piling up money for a specific goal like a house or a higher education. Investing is also important for financial freedom. Many wealthy folks make a large chunk of their money from passive income, i.e. investments. Take your time to read and comprehend all the information you can find about this. Once again, hiring a financial advisor would be a wise move especially if you are a complete beginner at investing.
7. Stop comparing yourself to others To put it as bluntly as possible: if you’re wasting your money to impress others, there’s nobody else to blame for your financial ruins other than you. Stop hanging out with people who belittle you and don’t view shows or influencers who make you feel less than. Spending beyond your limits is the quickest way to dig yourself a grave that will take you decades to get out of. As a matter of fact, most people you see online who live these lavish lifestyles can’t even afford it themselves; they’re surviving off of rentals and sponsorships which don’t last long. It’s all a façade.
6. Be debt free/ Pay off bad debt It doesn’t sound like the easiest thing to do but having debt can get in the way of meeting your financial goals. The least you could do is try paying off bad debts. Since most debt accrues interest, becoming debt-free can be a long process if you are only making minimum payments. One strategy to speed up repayment involves concentrating any extra money on one debt. Once that is paid off, snowball its payment into another debt and continue the process until all the debts are gone. Don’t make the mistake of putting savings on hold while paying off debt though. You can come up with a way of splitting how you make the contributions.
5. Spend less than you make While this feels like a message we are told regularly to follow, it is almost easier said than done. Just because your salary has gone up by a few thousand does not mean you need to upgrade every little thing in your life from a new home to a new phone cover. Remember: you’re playing the long game. Do not give into momentary temptations which will drag you away from your big-picture financial goals. This is why you require a budget; you know exactly what you’re spending your money on and you have your final destination or destinations in sight.
4. Schedule regular progress reports Managing your money is an ongoing process. It helps to schedule regular times throughout the year to evaluate your financial situation (this includes your income, spending, savings, and net worth). Also, keep tabs on your credit report to identify mistakes or know what could mess up your overall credit score. Remember, this also impacts the rates you pay on loans and credit cards. Use these check-ins to determine what progress has been made toward financial goals and whether any budget items need to be adjusted for the future. You may find your goals have changed, and your spending should change with that as well.
3. Boost Your Income While you do want to spend less than you’re making, don’t fall into the trap of being cheap and skimping on life’s comforts. Again, you’re not earning money for no reason, it needs to be enjoyed! Boosting your income can happen by getting a better paying job in your current company or but starting a side business. Whichever route you take, the aim needs to be to bring in more money so you can elevate your current lifestyle and have more for saving and investing.
2. Avoid payday loans One thing about these types of loans is that they are designed to keep you hooked! They seem like a good idea to get you through before you receive your paycheck but, in reality, they are there to keep you in a vicious debt cycle. Their interest rates are usually extremely high and give you no easy way out since they are easily accessible.
1. Save for retirement As young as you may seem, there will come a time that you will need to retire. This will be hard to accomplish if you do not have a retirement fund secured. Social Security benefits only replace approximately 40% of your income, and many employers no longer offer pensions. Research proves that most people only focus on handling their current debt without considering their retirement plan. Workplace retirement plans such as 401(k) accounts can be a good place to save for retirement since contributions are automatically deducted from payroll. Some employers are good enough to match their workers' contributions which boosts their retirement benefits further. There are tax incentives for these accounts as well. Contributions to a traditional 401(k) are tax-deductible, while Roth 401(k) accounts are funded with after-tax dollars but earnings withdrawn in retirement are tax-free. It is best to find out which works best for you. At the end of the day, the secret sauce to success is discipline. You need to stay on track by keeping your goals in mind and constantly having the faith in yourself. Everyone can attain financial freedom, all they require is a little faith.
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