Learn to Take Control of Your Finances
Financial freedom is the ultimate dream for many people. To achieve it, you need to build a financially secure life. The process is daunting and requires discipline to get to the goal. However, the essential step is to know where you’re standing today and where you’re going to get there.
So, how do you find your way to become financially free? The thing about achieving financial freedom is that there are many ways to do that. So, relax and take a deep breath. You only need to follow four ways to take control of your finances.
While some goals take years to reach, there are some steps to cut them shorter. All you need is a concrete plan to build your wealth. For instance, there are simple ways to pay off your debts and take control of your hard-earned money. So, are you ready to take on the challenge? Read on to learn how you can create a debt-free lifestyle.
How to Achieve Long-Term Financial Security
In a survey conducted in 2019, data show that 9 in 10 people say they are much more confident and happier when their finances are in order. If you agree, focusing on achieving long-term financial security should be your first step to taking control of your money.
To do that, here are four ways to help you manage your finances and become financially free:
1] Learn about personal finance management.
Educating yourself on how to manage your finances is a major step to building wealth. In addition, as an adult, you should know about money matters and the best ways to maximize your income.
If you’re not sure how to manage your finances, it’s important to understand the basics by reading eBooks, watching video tutorials, listening to podcasts, or using any readily available resources. There are so many free learning tools you can find on the internet to learn about personal finances.
2] Know how to budget.
The best way to take control of your finances is to create a realistic budget and stick to it. Financial stress is a vicious cycle of avoiding money issues which later on lead to more debts while giving you more stress.
To create a successful budget, it’s important to set realistic goals on how much to save as well as how much to earn as extra income. In addition, use your budget to describe and track your finances. Knowing how much money you save, spend, and have is a crucial step toward financial security.
You can use Microsoft Excel, Google Sheet, or a spreadsheet to create your budget. Write down your monthly expenses such as savings, mortgage, car payment, auto insurance, gasoline, groceries, taxes, health insurance, mobile plan, and other expenses.
3] Build an emergency fund.
Taking control of your finances involves covering unexpected expenses. Therefore, you need to build an emergency fund for future expenses that are not included in your budget. While it’s unrealistic to build up a huge fund when you’re in debt, you can put aside even a small amount that you can save for your nest egg.
It’s also important to consider how you can earn extra money to pay off your debts and increase your savings. For example, you can sell some books, clothes, or any item you no longer use at home. In addition, your emergency fund should have at least $1,000 until you’ve paid off your debts.
Once you’re out of debt, increase the money you save for your emergency fund. You should aim to save up to 6 months’ worth of your living expenses so that you won’t be in debt again in case you lose your job or your business went bankrupt. You can calculate this fund by considering your monthly budget to get a more accurate amount.
4. Organize your debts.
When it comes to paying off debts, knowing how much you exactly owe is important. The key is to write down your outstanding debts including credit card balances, car loans, mortgage payments, and others. Then, organize the amounts from the smallest to the greatest to make debt repayment much easier.
Debt consolidation is an effective way to manage your financial obligations with companies where you owe money. Besides the values of each debt, make sure to write down their respective APR. Then, you can start repaying the smallest debt so you can quickly move on to the next amount until you paid off your biggest debt.
The goal is to eliminate one balance at a time and continue repaying the others as you raise your morale with each small victory. On the other hand, you may also decide to initially repay your debt with the highest APR. Monthly interest charges can slow you down from repaying debts, so eliminating your balance with a higher APR can make the process more manageable.
According to an article published on CNBC called Personal Finance 101, “Paying off high-rate debt is one of the best investment moves, and the average 17% interest rate charged on unpaid credit card balances is a big roadblock to building financial security.”
Learn more about debtconsolidation.com and become financially secure in the long run. Please share your personal finance stories in the comment section below and let us know how you achieve your financial goals.