Most people are constantly trying to figure out how to find a way to get their financial picture to look when the money coming in does not balance the money going out. Individuals and families want to have enough money to pay their bills, save for their future, and, and have plenty on hand for leisure and fun. But sadly, many people are just robbing one account to pay another account in order to keep managing expenses from month to month.
Most people spend most of their time worrying about money or the lack of it, rather than in those leisure activities that a surplus of money can buy. There are some ways to help gain some of this financial freedom with a little patience and some hard work. It’s fun to spend money, but with some restraint up front the payoff in the long run, a person can get a handle on debt, savings, and spending money.
If the debt situation is severe, a consumer credit counselor may be the route to go to get some outside help. Make sure you go with a reputable service that is a nonprofit organization and an NFCC member. But if you are able to manage this situation and can get on top of your finances, these seven suggestions will get you on your way:
1. Spend Less Than You Earn
It’s tempting to buy the house and car you can afford, but do not. You do not have to keep up with any one. March to your own drummer and keep the house payment low and the car payment even lower. It is a fact, your car will depreciate the minute you drive it off of the lot, so be sure to shop wisely when buying a car. You don’t have to buy brand new to buy a good car in excellent condition. The key is to search for a car with low mileage that someone else owned for a year or two.
2. Create an Emergency Fund
This is one of the hardest things for most people to do. “Almost every time a sizable amount, such as even $200 or $300 gets in a savings account, there seems to be an emergency that I need money for,” one person lamented. This is not a solitary statement. For people who are stretching money from paycheck to paycheck, saving money is difficult. Even still, this emergency fund is critical. The money in the bank account will stop unnecessary credit card charges, pay day loans, and other spending that is only going to cause a person or family to fall further behind on improving personal finances.
3. Start Today
Open an online savings account or attach a savings account to your checking account at your bank. You could also try Stash for easy online investment. Whatever you do, start saving today…right now.
4. Pay off Debt
There are two strategies to approach debt payoff. One is to pay off high interest debt first. This is a wise strategy because higher interest debt is very difficult to pay off. And the larger the interest, the harder it is to pay down or off. Another school of thought is to pay off the smallest debt first and then roll the payment into the next highest and so forth. Paying off a low debt may help to give you a mental boost and then to encourage you to keep going and pay off more debt in the future. Which strategy you choose, be mindful in paying down debt. The road to financial freedom is having no debt.
5. Diversify Income
Try to earn more to save or to pay down debt. Sell anything you don’t use or love. Now is the time to downsize as well as earn money. The less you have the less space you need. In the long run, that can help you save even more funds. If you have a talent, or special craft, open an Etsy shop. Earn money with freelance photos, writing, dog walking, dog sitting, babysitting, baking, grocery shopping, and more. The ideas are endless.
6. Income Does Not Determine Wealth
A very wise factory worker once said to my mom, “The more money you make, the more you spend.” Think about that for just a minute. This philosophy tends to be the way we do things in our society and is also why many people have debt that equals exactly what they make. This mentality needs to shift to an accumulation of wealth regardless of what we make. Think about saving first and spending later. Make a budget with saving at the top before any money is spent for anything else.
7. You Must Design a Budget
Write your expenses and income down on a spreadsheet and account for everything. Make sure there is money for savings. If you are making extra money, allocate that money for debt. If all debts are paid off, put that money into a designated savings account.
The Road to Wealth
People who plan for the future by making a budget usually are the ones who are not surprised by financial setbacks. They save first for an emergency fund and then save for long term goals. If you have an emergency fund, it’s time to then tackle debt. Once debt is gone, then true financial freedom can be achieved, and you can experience a level of wealth this freedom allows for more fun and time with friends and family.