With every changing season or new year, we should try to better ourselves and improve upon our financial situation.
One of the most important things we can do to get started is by creating goals for ourselves. Everyone has a different situation financially and there is not only one “right” goal for everyone.
Below are 10 financial goals or steps that we recommend to help you get started on your journey toward financial freedom.
These steps can be looked at as both short-term (earlier steps) and long-term goals (later steps).
How to Become Financially Fit for Life
1. Reliable Income Source
This sounds obvious, but it is not always the easiest thing to attain. If income is one of your problems, then try and work a part-time job for the added income. Every little bit helps.
2. Establish a Monthly Spending Plan
This monthly spending plan should account for all of your expenses.
A spending plan will give you a financial road map, which will allow you to better plan where your money is spent and make it easier to allow for savings.
Tip: Tracking your expenses for one month is also a great way to understand where you spend your money on a daily, weekly, and monthly basis and will allow you to adjust your spending plan accordingly.
3. Save $1,000 in your Emergency Savings
Most experts suggest creating an emergency fund of approximately $1,000 kept in a standard savings account.
This is a great first goal to set for yourself if you do not have an emergency fund in place already. Give yourself an obtainable time frame as well because this will help you stay on track.
4. Pay Off Credit Card Debt and Personal Loans
Nothing helps free up money for savings, retirement, or those things you really wanted but could not afford before more than paying off your debts. Imagine how great it will feel to not have to make those monthly payments anymore!
5. Pay Off Car Loans
Car payments have become a way of life because all we really see is the monthly figure we pay every month.
Most of us do not think of the end result: how much have we actually paid for the car by the time it is paid off and how much is it really worth by then?
If you can afford it in your budget, round up your car payment. For example, if your payment is $265 a month, round it up to $300 every month. This only adds $35 a month, but you could pay off your loan much sooner and save a lot in interest.
Make sure to look at the term of the loan as well. Some car loans have early pay-off fees.
6. Pay Off Student Loans
If student loans are hanging over your head, you are not alone.
Concentrate on making little extra payments each month, if you can afford it, to speed up the process. Also, look into your options for consolidating your loans and programs to lower your payments.
7. Pay Off Mortgage
If you have paid off all of your other debts, then adding more to your principal mortgage payment could be a good goal for you.
Experts agree that all other debts should be paid off and savings should be well established before adding more to your mortgage payment. Remember though, interest rates on mortgages are almost always lower than interest on other debts, like credit cards.
8. Save at Least Six Months Worth of Expenses
Increase your emergency fund and build a cash cushion worth six months of living expenses.
If you do not have an emergency fund, things, like loss of income, a broken furnace, or a damaged car can seriously upset your finances.
9. Save for Kids’ College
We all want to help our children be the best that they can be and give them every opportunity to succeed. We can never underestimate the power of education and how it opens doors, but it is very expensive.
Try opening new savings accounts for your kids’ college or a 529 plan, which has tax incentives much like a 401K or IRA but for college.
10. Increase Retirement Accounts
Retirement accounts are becoming more and more critical every year. We have to do it for ourselves with social security coming into the question of whether it will be available when we are of retirement age.
And even if it is, will it be enough to live on?
When you get a raise, take half of the percentage of that raise and add that toward your retirement account(s) after every paycheck. This way you are saving more and not having to cut into something else.