A 2021 survey revealed that only 28.5% of the total adults in the US are fully financially independent. The same survey also showed that nearly half of the American adults say their parents still pay some or all of their bills. Improving your financial future might seem like a tough job requiring a lot of patience and self-control. But it doesn’t need to be difficult at all. Here are some tips on how to build a secure financial future.
1. Exercise Control When Using Your Credit Card
Limit the number of credit cards you use. Ensure the others are discontinued. Make sure to repay the entire credit card bill before the due date, and not just the minimum amount. Just paying the minimum amount could turn into a very high interest loan!
If you feel you might not be strong enough to resist temptation, swap your credit card for a debit card. With a debit card, money is deducted from your bank account for any payments. There are no additional costs and no access to limitless credit.
2. Learn Budgeting
Prepare a budget, create a plan for expenses, and stick to it. Make sure to include all essential expenses for the month, such as utility and grocery bills, rent, loan repayments, etc. Separate these from luxury or aspirational expenses. This will help you understand where you can cut back.
Once you set the budget for the month, stick to it. You can also use online budget calculators to decide on the budget.
3. Clear Your Debts/Pay Bills on Time
If you do not pay your bills on time, you are likely to incur late payment charges and other interests. Note down all your debts, such as student loans, credit card dues, home loan, etc. Include utility bills in this list too. Paying only the minimum amount on your loans will not help you in the long run. So, apart from your fixed expenses like rent and other bills, plan out how much additional money you can use to reduce debt each month.
4. Save & Invest
Learn to make money from money. Just putting aside savings in your bank account isn’t good enough. It won’t even help you beat inflation. Instead, invest some money regularly. This will give you the opportunity to build savings. While you’re working hard for your financial freedom, put your money to work too.
5. Start an Emergency Fund
Just as making money from money is important, saving for emergencies is also crucial. If you do not have any emergency funds, you could end up needing to borrow money and increasing your debt burden if anything unfortunate were to occur. You can save a small amount on a weekly or monthly basis and deposit it in an interest-bearing bank account. It could prove to be a lifesaver in times of need.
The Bottom Line
Set up small goals to achieve your financial freedom. You can also follow the famous 50/30/20 rule to manage your funds. This says that from your total monthly earnings, you should allocate 50% to your needs, 30% to your desires, and 20% to savings or investments. So, just a little planning can help you build a bright financial future.