As the U.S. economy continues to consolidate and improve, now is the best time to get a handle on your personal finances and work toward achieving financial freedom.
Many people fail to meet the goal of financial freedom because of poor budgeting, uncontrolled spending and crushing debt. Here are 10 strategies to get your financial life on the right track.
The wisest investment you can make is to maintain a good health. Follow a healthy lifestyle, get annual medical and dental check-ups done on time, and fight-off overweight or obesity. Poor health often results in higher medical expenses and increased health insurance costs and may even force you to retire early with inadequate retirement savings.
Live within your means
Focus on your needs instead of wants. It is possible to lead an enriching life within limited means. Frugality is the fastest and safest path toward eventual affluence. Develop a mindset of saving, investing, and multiplying your wealth rather than letting your money evaporate from spending.
When the economic environment is uncertain people who have worked on upgrading skills and knowledge usually keep their jobs. Continuous education will put your career on the fast track. Even if you are an entrepreneur or a self-employed professional, updating skills is will keep you ahead in competitive marketplace.
Bargaining is not a dirty word. Rather, it’s basic personal finance. Unfortunately, many Americans are reluctant to bargain for the best price because they think it is embarrassing or “cheap.”
In reality, sellers often are happy to negotiate, give discounts and rebates and offer more favorable terms of purchase. They know it builds customer loyalty, encourages bulk buying, and brings repeat business. Try negotiating. You will find sellers happy to oblige you more often than you think.
Maintain what you have
A stitch in time saves nine, as the saying goes. The cost of maintaining your home, car, appliances, furniture and fixtures — even well-made clothes and shoes — is far cheaper than the replacement cost. Do not shy away from spending on periodic maintenance of all your valuable assets and property. You could save thousands of dollars a year.
Keep good credit
Maintaining excellent credit will not only open doors of financial opportunity for you but will also keep you away from the dreaded debt trap. Lenders use your credit score to decide what interest rate they may want to offer you when you plan to take out a new mortgage, refinance an existing loan, or purchase a new vehicle.
Your credit score influences your life insurance premiums and auto insurance rates, which will add up to a serious amount over time. Remember, insurance companies assume that a person who is less creditworthy also is likely to be less dependable in other areas of life, such as safe driving and healthy habits.
Avoid credit card debt
Pay off your credit card balance in full at every month. Prioritize this payment over other expenses because the high interest charges on credit cards will corrode your financial stability over time. Moreover, if you pay off your credit card bills on time, that alone will improve your credit rating.
If there is no way you can curb your habit to spend more than you earn it may make sense to switch from credit cards to debit cards. You cannot run up a debt on this card; it will only let you spend until you have emptied your account. Remember to also opt out of overdraft coverage if you are trying to limit overspending.
Automate your money
One of the tried and tested personal finance best practices is to automate your recurring monthly payments. If you have the habit of easy spending, this practice will ensure that your essential monthly bills are paid out first before you can spend on any non-essential items.
Another good practice is to set up automatic fixed financial transfers from your checking account to a savings account. This will force you to save a certain minimum amount every month to build an emergency fund as well as retain some amount for investing. Automating your finances minimizes distraction while helping you to build savings and investments without too much thinking or procrastinating.
Historically, no other asset class has enabled people to grow and multiply their wealth as much as equity investments. Stock markets fluctuate in the short run but, over longer periods, investing in high quality stocks can help you attain financial freedom. Do not ignore the power of compounding. Invest small but invest regularly, and be patient. That is the safest way to make big money over time.
Avoid speculative investing, day trading and complex financial products that you do not understand. Stay within your circle of competence and do not attempt to get rich overnight through risky stock market moves. If you can invest in equities with discipline, over time you will find that gains are inevitable.
Hire a financial advisor
Once you reach a certain level of wealth it may be time to hire a professional financial advisor. A trusted advisor may turn out to the smartest move in your journey towards financial freedom. Your advisor will educate you about your best savings and investment options and give you right advice regarding taxation and the implications of financial decisions you must make.
Remember that a financial advisor has no personal stake in your money. They remove emotion from the equation and can bring objectivity into your financial moves. All you need is just a few right decisions in life to take your personal wealth to the next level.