Generally, when searching for answers about personal finances and becoming financially secure, I think many people are hoping for magic formulas. Or just looking for some sort of secret process that has never been shared before.
If that is your thinking, I need to tell you that there is no secret formula! Don’t worry, in my early days of researching I was hoping to find that too. But in reality, the steps to becoming financially sound are really straightforward. Here I explore some simple steps that can help guide you to some financial security.
1. Start Living Below Your Means
A big problem I think many of us face is that we live above our means. We fund a lifestyle that we clearly cannot afford for whatever reason that may be. If you want to get financially stable, you got to start living below your means; spending less than you earn.
For example, you can lower your bills like living, food, transportation, and utility bills. This may mean downsizing your home, car, and being more money conscious of your food habits for awhile. But get these under control.
2. Put Together A Debt Payoff Plan
Getting financially stable means eliminating your bad debt and as fast as possible. This includes credit card debt, student loan debt, and car loan debt. Two debt pay options you might want to consider are paying off the debt with the highest interest first, or paying down the debt of the lowest amounts to pay off things right away.
3. Build Out Your Financial Plan
Think of your financial plan as a roadmap that will help you and your family navigate money. It helps you layout goals, steps, and what you will need to do to reach financial stability. Your plan doesn’t need to be overly complicated but should cover your expenses, income, savings, spending trends, debt, insurance, even estate planning or wills.
4. Find Ways to Earn More Money
As you are budgeting and understanding where your money is going, you’ll be starting to cut back on your spending. This is great, but remember that you can only cut back so much.
A big part of becoming more financially stable is going to be earning more money. Making more money can help ensure you reduce financial struggles and can be more at peace. But be warned, you want to be careful not to fall into the lifestyle trap as you make more money either.
5. Master Your Own Financial Literacy
A great way to become financially stable is to start to educate yourself. Understanding money and budgeting may seem challenging, but it’s really not if you dedicate time to learning.
When you are informed about debt, investing, and budgeting — you’ll start making better future decisions and be more conscious of current financial moves.
6. Plan for Your Retirement ASAP
You need to think long-term too and how you’ll be set later on in life. It might be challenging to think about early on and when you are just piecing your finances together.
Preparing for retirement early, will give you a massive advantage as you have time on your side. This gives you years of investments and your money to compound, helping you reach your retirement savings goals.