5 Rules to Improve Your Financial Health
The road to financial independence isn’t a straight line. Instead, it’s a journey that takes time and patience. We can do so many little things to improve our financial health and increase the likelihood of retiring with financial security. Even if you aren’t ready to retire, there are many ways to create an extra income stream. This blog will help you build and plan for your retirement, allowing you to establish a more solid footing from which you can take the next step in your financial journey. Here are five practical ways you can improve your finances today:
Ditch the debt
The average American has more than $55,000 of combined credit card, auto, and consumer (non-mortgage) debt. That’s a lot of money going out of your pocket every month, and it’s taking away from your ability to spend on other things. When you have debt, you have to pay interest on your bill. It’s not just a cost — it’s an income for the creditor. That’s not a good position to be in. At the same time, it’s important to realize that you can’t retire on a credit card. That doesn’t mean you have to pay off your debt tomorrow. It does
mean that you need to start looking at your consumer debt as a priority. It’s essential to prioritize your debt over everything else. It may be a good idea to take a temporary pay cut or make some changes to your lifestyle so you can put more money toward your debt. Once you have a plan in place, then you can start
making progress.
Save more
The majority of Americans do not have a retirement account. The median retirement savings account balance is only $2,500, according to a 2018 survey. That’s nothing. If you’re saving even a small amount of money, it can add up over time. If you’re in debt, you have to make payments. In order to pay off your debt, you have to make payments on other things. The easiest way to save more is to increase your monthly contribution to your retirement
account. Many employers offer a matching contribution, which can be a huge boost to your savings. There are also a number of retirement savings accounts that offer perks like high-interest rates or the ability to earn extra money.
If you’re planning on staying in your job for a while, you may be able to make some extra money by investing in a retirement savings account. It may take a little bit of time to make more of a difference, but it will ultimately save
you in the long run.
Cut back on your spending
Many people think that they need to blow through their savings every year in order to reach financial independence. This is simply not
the case. The amount of money that you need to reach financial independence is entirely up to you and your situation. Even if you do want to blow through your savings, you shouldn’t. Instead, you should try to save a little bit more and take advantage of the reduced spending that comes with a lower income level. For example, if you are collecting unemployment, then you are allowed to reduce your monthly spending. If you are on a tight budget, you may want to start
looking for ways to live with less. You would also be wise to start saving money. Once you have a little bit saved up, you can start making investments. This can help you reach your goal of financial independence faster.
Borrow less
It’s a common misconception that you have to take on tons of debt in order to retire. This is simply not the case. In fact, you can retire
with much lower levels of debt. If you have a credit card with a high-interest rate and a low limit, it may be a good idea to pay off the balance each month. This will help to reduce your monthly spending, which is another way that you can save money today. If you have a ton of debt and you’re looking at a long
repayment period, you may want to consider refinancing your loan. This will save you money over time. There are also a number of loan consolidation loan options that allow you to combine a number of different loans and lower your overall interest rate. If you can find a loan that will let you pay off the debt, then you can reduce your monthly payment and put money toward your finances.
Invest
This is one of the most important steps to remember that investments are meant to help you reach your financial goals. This means that you should not treat your investments as a way to make money today. Instead, you should look at them as a way to make money in the future. The best way to make money in the future is to
invest as much as possible as soon as possible. If you are making minimum payments on your debt, you are effectively stealing money from your investment account. This is a no-win situation. The best way to ensure that you reach your financial independence goal is to increase your monthly contributions. This ensures that your money is working for you, rather than against you.
Conclusion
The truth is that you don’t have to be rich to retire. It can be done with just a little bit of preparation and discipline. The sooner you start saving, the sooner you can get on track and reach your goal. With a little bit of effort, you can financially secure yourself.
Matt Ward, CFP®
817-238-6300
Matt.Ward@newcenturyinvestments.com