Financial success doesn’t necessarily mean owning a million dollar mansion, a luxurious yacht or being able to buy whatever you want. Achieving financial success means that you are financially secure and can protect yourself and your loved ones from the unknown. It means that you and your family are out of debt and can live comfortably knowing you are prepared for any curveballs that life throws at you. Obtaining financial success and maintaining financial stability requires developing healthy financial practices. By mastering the basics of financial literacy, you can take that family vacation for the holidays or get the financing you need to purchase a new SUV with strong credit.
Spend Less Than You Earn
The first step to achieving financial stability is evaluating your finances and what you can afford. The most effective way to do this is to create a budget that you strictly abide by. This should be a reasonable budget for yourself that allows you to live comfortably without making unnecessary purchases on things that you want rather than need. This includes putting aside a specific amount of money to spend on necessities like gas, groceries, utilities, rent, etc. Additionally, make sure to account for savings in your budget so that you always have money to put away. Budgeting allows you to identify what areas you are overspending and where you can cut down. For example, you may notice that you ate out a lot last month. You can make it a point to buy more groceries that will last you longer and pack lunches for work so you can avoid ordering food through Uber Eats.
Pay Your Bills Ahead of Time
Paying your bills later in the month can give you a false sense of how much money you have to spend. By paying your bills ahead of time, you will know just how much money you have to put away for savings and how much you have left to spend. It will also prevent you from missing important payments, accumulating late fees and not having enough money to pay your bills. If you pay early on car loans, mortgages and credit card bills, you can actually reduce your interest rates and save money in the long-run. Furthermore, many service providers, such as Progressive Auto Insurance, and government agencies provide discounts if you pay your bills ahead of time.
Plan for Your Future
Your future self will thank you if you plan ahead and save for the future. If you’re young, you probably do not think it’s necessary to plan for a retirement that seems to be light years away. However, the best time to start is now as your investments will grow more over time. A 401K is an employer sponsored retirement plan that allows you to put aside a portion of your paycheck into a tax-deferred account. Enroll in a plan and check to see if your employer makes matching contributions. If you would like to open an account on your own without being attached to a company, look into opening up an IRA or Roth IRA.
Another way to plan for the future, is to build an emergency fund. This is important as you may experience unexpected expenses such as a major car fix, home-appliance repair, emergency room visit or unemployment. It is recommend that you save three to six months’ worth of living expenses in the event that you become unemployed. To do this, you can open up a high-yield savings accounts that is federally insured.
Eliminate and Avoid Debt
If you have student loans, credit cards or other kinds of debt, you need to start a debt elimination plan. While it can take several years, paying off your debt can improve your credit score and allow you to finance that mortgage or car you want. Additionally, avoiding debt is very important if you want to maintain financial security. The more you accumulate debt, the more your monthly payments will be to pay the debt off and the more your credit score will suffer. This can intervene with any goals you have, like taking a trip or putting money towards your wedding. You can avoid getting into debt by spending only on what you can afford and paying your loans and credit card bills on time.