Many people feel trapped under the weight of their financial burdens. According to CNBC, the average American has over $30,000 in personal debt. Unfortunately, despite the best efforts of many, their financial hardships continue to increase. However, even with these significant statistics, there are ways to improve your financial situation and get out of debt. You can begin to grow wealth when you implement a personal financial plan. A successful financial plan can help reduce the stress associated with handling money and paying off debt. Here are five ways to set yourself up for economic success and stability using a well-thought-out strategy.
1. Set Financial Goals
If you aren’t sure where you want to be financially in 10 or 20 years, who does? Identifying your financial goals will help you understand what you want both over the short and long term. The sky is the limit. Set goals that will inspire you. You can do this by visualizing how you want your life to look. What does your house look like 20 years from now? Is it situated on a beach-side property pr in the mountains? What color is it? How many bedrooms does it have? Do you own a car or have a retirement nest egg you use for traveling the world?
Establishing goals allow you to complete the steps necessary to create a financial plan. Goals inspire you and act as a guide. If you’re unsure how to start, simply take a personal inventory of things that are important to you or interest you.
2. Track Your Money
To get an accurate picture of your monthly cash flow, it’s essential to track what items are coming and go out of your account. When you identify these key elements, you can begin to create a financial plan that suits your needs and reveal additional ways to save money or pay down debt.
Creating a monthly budget is one way you can create healthy spending and saving habits. According to usnews.com, those who track their finances using a budget generally meet their monetary goals more than those individuals who don’t.
3. Set up a Retirement Account
Many Americans make a common mistake when planning for retirement by not taking advantage of their employer’s retirement benefit. However, when you pass up this bonus, it’s like you are saying no to free money. While this may require you to take more money out of your paycheck each pay period, it’s well worth it. Most financial advisors generally recommend contributing to an employer-sponsored retirement plan and taking full advantage of their 401k match benefit.
4. Create an Emergency Fund
In order to start saving your hard-earned money, you would need basic knowledge in finance, or at least a personal finance course to give you enough knowledge to complete this task successfully. The foundation of any financial plan begins with setting aside funds for emergency expenses. The amount doesn’t need to be significant at first. Even stashing $500 away for unexpected expenses is helpful. However, once you reach your $500 goal, why not extend it to $1000? By saving money for such events, you are placing yourself in a better financial situation and reducing potential stress associated with money.
5. Reduce High-Intrest Debt
Debt with high-interest rates often means repaying two or three times the original amount of the loan. This is why paying off high-interest accounts is crucial to your financial welfare. However, if you are struggling with revolving debt, learning about debt consolidation or researching a debt management plan may be a good place to reduce the amount you owe to your bank or credit card. By consolidating debt, you may be able to wrap several expenses into one at a lower interest rate than your current one.
With a well-thought-out strategy, you can begin to reduce debt and grow wealth. Start your financial plan by creating goals. This will guide you toward the next steps of financial success and reduce the stress associated with money deficit.