Many people falsely believe that you need to be wealthy to make use of financial services. This is the opposite of the truth. Professional who work in financial services help the average people with average income levels develop a wealth management strategy that protects their future and retirement, and gives them the peace to enjoy life.
Sometimes it feels too overwhelming to seek financial services because your finances are a mess. Your paycheck barely keeps your family fed and a roof over your head until your next payday. If you live paycheck to paycheck, you are not alone. About 40% of families are in the same boat as you; they do not have enough money to put a fiver aside for a rainy day. Much less worry with financial services such as investing in retirement and paying off debt. This doesn’t have to be the case. No matter tight things are, with a few pieces of good advice, you can be on track to have the financial freedom you’ve dreamed of.
Three Steps to Financial Freedom
- Put a name on every dollar.
The first step in developing a good financial plan is knowing where your money goes. Look at three months of financial statements and calculate what your monthly income is. Next calculate how much of your income goes to housing, vehicles, utilities and other necessary bills, and “flexible” costs like groceries, gas, and entertainment. Identify ways to cut back. Depending on how tight your budget is, you might find it beneficial to make drastic moves. Maybe your vehicle is eating 25% of your monthly income; it might be a good idea to trade it in for a less expensive car. Or, sell it and buy yourself a car (maybe ugly, but reliable) that you can pay cash for, to eliminate to car payment line item from your budget altogether.
Groceries are another area will huge savings potential. You have to eat, but by setting a goal for how much you can spend on food, you’ll be inspired to find cheaper ways to feed your family. By putting a name on every dollar you spend, you’ll be amazed how much extra room you can make by cutting unnecessary spending. - Build an emergency fund of $1,000
It might seem anti-intuitive to put money in savings while you have debts that are costing you extra money in interest. However, having a little padding to fall back on when the unexpected arrives will help you gain financial freedom faster. Think about it. If all of your money is going to your debt, when Murphy’s law inevitably occurs and your car breaks down, your only option is to put the repairs on a credit card and lose all of the momentum you gained. On the other hand, when you have a little cash set aside for unexpected costs, now you can deal with your crisis without falling back down the mountain of mounting debt.
So how do you save cash when you have nothing left over in your budget? Get creative. Sell clothes to a consignment shop. Offer up skills you might have (such as tutoring, fixing your neighbors car, baby sitting on the weekends). The extra money you make on the side can go straight into a savings to protect you from emergency costs adding to your debt. - Now tackle the debt.
Once you have a little nest egg, take that extra cash you are generating, and throw it at your debt. Some financial experts suggest starting with the smallest debt first to gain momentum. Put the bill on your fridge. Know the balance. Every extra dollar you make (or money you hold onto by cutting costs) takes that balance down a little more.
Once you get the smallest balance paid off, take the payments you were making to that credit card and apply it to the next smallest debt, and then the next. Continue this “snow ball effect” until eventually, your largest debt is receiving the sum of the payments you used to make to all of your credit cards, and eventually you pay it off.
Do you have any great advice for gaining financial freedom? Please share them below!