In today's unstable economic climate, the financial fears of our past can get overwhelming fast. If the bills are stacking up and it seems like there's no end in sight, cheer up! There is good news and there is a way to alleviate those fears. By instilling a few simple tools into your financial life, the fears of yesterday and today will fall away, and you can be empowered to take the power back in your financial life, for today, and for long after COVID-19 comes and goes. We are going to talk about 5 main tools that will add years to your life and zeros to your bank account over time.
1. Get Out of Debt and Stay That Way
Borrowing money is so normalized today, that living a debt free life seems weird or abnormal. Credit cards, payday loans, car loans, and innumerable forms of other debt pervade our daily lives, sapping our earning potential with thousands in interest payments. If we buy into the "debt is okay" lifestyle, we are stealing from our today and our tomorrow. For every dollar we bring in today and send right back out to the bank or the creditor, we lose out on a dollar of opportunity that we could put to work for us, to earn interest and build wealth for the future. If you already have a mountain or molehill of debt, don't fret. The debt snowball pursuit of debt elimination is a super-effective tool to pay off debt and keep yourself accountable in the process.
2. Set a Budget and Stick to it
Creating a budget is a scary process, and it can be painful to see the fact that we are holding ourselves back with our daily coffee runs and eating out for lunch when working. But if you can commit to a budget, and stick it with for just a couple of months, the benefits greatly outweigh the minimal work needed to put in. You will "find" lost money all over the place, in coffee runs, drive-thru visits, and random online purchases. This money can then easily be rerouted to be put to work for us, rather than against us.
3. Spend Less Than You Earn
Your shiny new budget will show you where your money is going, and help you move it in better directions. Once you have this vital knowledge, make sure that you are changing your spending behaviors too. If you get all this great information about your spending habits and then do nothing to change your behaviors, then the cycle of financial insecurity will continue. At its very simplest, your budget will help you to spend less than you make, and when you spend less than you make, you begin building wealth rather than building debt. When you are building wealth, you are creating financial security for yourself and your loved ones for the future.
4. Share Your Recovery Goals with Friends
Involving your friends and family in your financial planning provides two things; accountability and support. Everyone needs cheerleaders for the long slog of building wealth. We need help to stay motivated and focused on our goals and to avoid the out-of-budget, out-of-mind spending.
5. Invest in Your Future
Once you've cleared up your past debts and cleared up your current spending habits, you'll be able to start building for your future. The simplest way to do this is to participate in your employer's 401(k) or 403(b) plans or to open your tax-advantaged retirement and savings plan like a Roth IRA. These will help you build real wealth over time if you're consistently contributing to these plans.
These 5 tools will get you started down the path of financial security by cleaning up your financial past and present to set yourself up for the future. By committing to new spending habits, clearing out old debts, and investing in the future, the financial fears and anxieties of the past will fall away, and feelings of confidence and hope will replace them.