Financial freedom. We all want to get to it. In order to control your finances and not be controlled by them, it’s going to require proper planning, execution, and discipline in certain areas of your life.
In this article, I’ll be putting you up on game to the steps that you should be taking to help set yourself up for financial success in the future.
Regardless of what kind of money you’re making (you got to be making something though), you still have the ability to create the solid foundation that could help you build wealth and obtain financial security by taking the proper steps.
Every persons situation is going to be different, but you can still use this list as a general guideline and tailor these points to your own situation and needs and make it work for you and your overall goals.
Work on these following financial goals and strive to get your mind and your money right.
1. Educate Yourself On Personal Finance
You should know by now that knowledge is power. The sad thing about personal finance is that it’s not really taught to us when we’re young. Most of our parents had to be busy teaching us how to behave when they were not working, and our school systems have little to no education that provides knowledge on personal finance.
Fortunately, we live in a digital age where an abundance of information is readily available at our fingertips. There are plenty of websites, and YouTube channels and videos that teach basic and advanced concepts of different aspects of personal finance.
If reading is a more comfortable learning style for you, there are plenty of books and e-books on personal finance. Other resources that can be considered are courses, seminars, and consultations from experts within the personal finance industry.
2. Create a Budget
It might sound like something that only moms and nerdy women do, but in your quest of achieving financial stability, creating and sticking to a budget is the type of discipline that will be required of you.
You’re going to have moments where you’re going to wonder how the hell you’re already broke after getting paid less than a week ago, or wondering how you’re going to make a particular purchase in the future if you’re not saving the amount of money that you need at the right pace, and creating a budget can very well be a solution to these types of issues.
Creating a budget allows you to pinpoint the areas where you may be unnecessarily spending (and basically wasting) money, and this allows you to save money and increase your savings over time.
One of the main advantages of budgeting is the fact that you are holding yourself accountable and being responsible with your money and how you’re spending it.
Don’t delay and take some time out to create a budget as soon as you can.
3. Start an Emergency Fund
In life shit happens, and you never know when you’ll have a situation that pops up out of the blue that requires you to have some extra cash. The transmission on your car could go or you can lose your job. There are plenty of unexpected life events that you can choose as a reason for why you need an emergency fund.
That emergency savings can come through clutch when you need help in getting out of a crunch, and it can also help you out with achieving some long-term financial goals.
You can save up to $1,000 to start your emergency fund, but it’s always a better look to try and exceed that threshold and save up to 6 months of living expenses (money for rent, utilities, food and other basic needs), so that you’d be able to support yourself (and your family if you provide for one) in a situation where you have lost your job.
The most ideal situation is if you’d be able to save up to a year of living expenses in the case of a major emergency, like say, if a global pandemic was to hit, and you lost your job and wasn’t able to collect unemployment or a PPP loan. Or maybe even for something a lot more simple, like an injury at work.
The more responsibility that you have like a wife, kids, or a mortgage, the more you have on the line, and the more you would want to have in your emergency fund.
Having 6 – 12 months of living expenses put to the side can also allow you to do some other things that you might want do, like make an investment that seems profitable, or start a business if it seems like the right time and opportunity.
You might also decide to take some time off and take a trip or travel for a few months and that extra cushion is what can gave you the ability to do that.
If you don’t have an emergency fund already, it would be beneficial to start working on saving for a rainy day as soon as you can.
4. Maintain Good Credit
One day you’re going to want to make a nice big purchase that you can’t pay cash for, like that house that you’ve always wanted to buy, and you’re going to need to have good credit to be able to do so.
It will always be beneficial to your future financial goals, to understand the importance of credit and how to use and maintain it. This is another important skill set that wasn’t really taught to most of us when we were young.
Mistakes made on your credit today can haunt you for years, even a decade from now. So it’s important to take certain steps like, get the free annual credit checks to monitor your credit, pay your bills on time, dispute anything that looks unfamiliar, and pay off debts as soon as you can among some other things.
Doing all of these things will allow your credit history to look the best that it could while also helping to boost your score as high as you can.
The internet has a mass of free sources that provide information on how to maintain good credit.
5. Start a Side Hustle
It’s a great idea to try and abide by a budget and save money, but it’s also a great idea to find ways to make more money.
I’m sure by now that you know that one of the best ways to get your money up is to have multiple streams of income.
Most times out of ten, the money from your 9 to 5 won’t be enough to help you get to the financial freedom that you want to get to at the pace that you want to get to it.
When you’re not at your full time job, you can make more money on the side with an entrepreneurial venture that you may be passionate about, or just by having a side gig that you can get your hustle on with.
You might have a skill that people will be willing to pay you for, or an app that contracts jobs where you can make some extra money, either way, you have to motivate yourself to get to it.
More hustle, brings you more money that will help you build your personal wealth and achieve your financial goals faster.
6. Start a Retirement Account
Unless you know for a fact that you’re going to be a millionaire before retirement age, it would be a good idea to plan on investing into a retirement plan as soon as you can.
The purpose of a retirement plan is to provide you financial stability when you leave your full-time job at retirement age (which is normally about 65 years old).
Different sources have different numbers when it comes to how much money a person can live comfortably with when they retire, from as low as $500,000 to around 1.7 million.
The sooner you can start putting into your retirement account the better, and the more the better, because it’ll help you get to your goal quicker.
When money is being deposited into a retirement account it accrues money in interest annually. So if you were to put $1,000 a year into a retirement account that earns 5% a year from age 25 to 64, you would have invested a total of $39,000 and would have $126,840 by the time that you turn 65.
When you start to get things in order with your budgeting and your emergency fund, look into starting a retirement account. If your job offers a 401(k) plan, sign up for it. If they also offer 401(k) matching, contribute at least the minimum amount that you’re eligible to receive matching funds, and again the more the better.
If you’re job doesn’t offer a 401(k) plan or you’re self-employed, you can open up a Roth IRA account. Your bank will more than likely offer a Roth IRA, or you can use an online broker service like Vanguard or Fidelity.
Aim to contribute a minimum 5% of your gross income towards retirement. As you get better with paying down your debt and increasing your emergency fund, you should increase your savings rate.
7. Learn How to Negotiate
If you make $20 an hour, you’re basically making about $40k a year. If you’re making $21 an hour, you’re making about $42k a year. When I realized that every dollar added to your pay rate equals out to about an extra $2,000 a year, it made me realize how much money I was leaving on the table over the years, simply because I had little to no knowledge of how to negotiate.
There are so many things that you may not even realize that you can negotiate, like car insurance, homes, phone bills, cars, and appliances.
You’d just have to work on mastering the art of negotiating, and this skill will keep more money in your pocket as well as help you earn more money.
Get some practice in on how to negotiate and build your confidence, and this is sure to help you save and make more money in the future.
8. Consider Term Life Insurance
We all have to die one day, and you never know when that day will come. It could be tomorrow, it could be 40 years from now. Regardless of when it happens, wouldn’t it be honorable for you to leave behind financial support with your loved ones?
Life may become a little harder for them without you, and you can make sure that they’re taken care of when you’re gone by purchasing term life insurance.
There are other types of life insurance besides term life insurance (like cash value or whole life policies), but they tend to be more expensive and kind of confusing. Term life insurance is the most recommended for single adults on a budget, and is less expensive.
With term life insurance, you pay a monthly premium for a set term, or a set amount of years (could be 10, 20, 30 years, whichever you decide) , and if you die within the term, the insurance company pays out the amount of the policy that you purchased to your beneficiaries. So if you buy a $400,000 20-year term life insurance policy and you die anytime within those 20 years, whoever that you set as as the beneficiary will get a $400,000 payout from the life insurance company.
Life insurance is a turn off to many because it’s said to be too costly. If your family depends on your contribution to help them survive on any level, it would definitely be worth it to give your loved ones that financial comfort in the event that you passed away before they did.
The only downside to term life insurance is if you don’t die before the set term, you’re policy just ends, and you’ll no longer be covered. There isn’t any type of financial compensation when your term life insurance ends either.
You do have options of converting your term life insurance policy into a whole life insurance policy, but you will have to pay higher rates. You can also extend your policy, or get another one so that you can still make sure that you take care of your loved ones after you die of old age. The upside is that you’re still alive.
9. Set Long Term Goals
Much of what I’ve talked about in this article can basically fall under the umbrella of being different types of short term goals that can get you on track with becoming financially stable.
It’s never too early to work on your long term goals. If you know you want to buy a house even as far as 10 or more years from now, you can start saving for it now. If you want to have a certain net worth by the time you’re a certain age in the future, you can start making the moves to get there now.
Whatever your goals are, stay motivated, get started, and take things one step at a time.