Your everyday financial activities and decisions have an impact on your long-term financial health. Here are seven proven steps that will help you manage and improve your finances and create a more secure future.
Begin with a prudent budget
If you believe your financial position is shaky or inconsistent, it is time to create a budget. A practical budget that outlines how you spend your money every month will serve as a tool to control your financial future.
Make a note of all your regular monthly expenses and income. Monitor your actual monthly spending and tailor it to meet your budgetary goals.
Get rid of costly debts
High-interest personal loans and credit card debt can burn a serious hole in your finances. Identify which of your current debts are costing you the most, and focusing on paying them off on a priority basis.
Consolidate multiple debts, negotiate with the creditors for a reduced interest rate, cut down discretionary spending and execute a debt repayment plan with commitment.
Reconfigure student loans
Student loans can place an enormous burden on your finances for years to come, and prevent you from making growth-oriented investments. Check out whether you might be eligible for a student loan forgiveness program, and proactively explore the benefits of consolidating or refinancing your student loans.
Discuss with your lender about an automatic loan payment schedule in return for a reduced interest rate.
Generate more income
In a growing economy, it makes sense to invest your time and energy in increasing your income rather than looking to cut corners in monthly spending (if you are already a conservative spender).
Evaluate your skill sets and see if you can make additional income on the side by taking up online freelancing. If you have a property or even a spare room at home, you could rent it out to generate a stable passive income.
Boost retirement savings
While it is important to focus on your present, do not lose sight of your retirement plans. Even if you have debts to pay, your goal as an employee should be to contribute to your retirement up to the match that your employer offers.
It is almost never a smart idea to give up this free money. Once you are free from major debts, it is time to start accelerating your retirement savings to maximize the tax benefits and build long-term financial security.
Upgrade your skill set
When you spend money on an online course or classroom training, or spend time to acquire a new professional skill, it may not immediately improve your finances. But when the economy goes through a rough patch because of higher taxes and overregulation, your job will be more secure because you have upgraded your job skills.
If your employer offers extra training certifications, it is worth taking up the opportunity. Sooner or later, your skill set is going to impact the size of your paycheck.
Create a financial plan
Unlike a monthly or annual budget, a financial plan covers a longer time horizon of 15, 25, or 30 years into the future. A carefully thought-out financial plan will help you keep the bigger picture in mind while you make your everyday financial decisions.
It will account for key events, such as taking out a mortgage, paying for your children’s tuition, saving for retirement, and making long-term investments to grow your wealth.