Many Americans are in debt. What’s wrong with that? Well, when you’re in debt, you’re in a constant state of stress, whether you realize it or not. Having a safety net of savings, while not as exciting as keeping up with the Jones’ is vastly wiser and better for you. When you have a savings account, you will not worry if you suddenly need to do a home repair, or get sick and have to take time off from your work. You can also put your savings to work for you by investing so your money will grow on its own.
Spend Less Than You Earn
Spending less than you earn seems so obvious, but it can be hard to do if you don’t have healthy habits. For some people, this means cutting back on lattes, and only buying second-hand goods when you have to buy at all. For others, it simply means asking for a raise, getting a higher paying job, or starting a side hustle.
Automate Your Bills
Keeping track of when bills are due and sometimes forgetting to pay them is another stressor that you don’t need in your life. Spend a couple of hours setting up your bills to be automatically withdrawn from your bank account. You won’t have to spend any more time on it throughout the month, and you will have no more late fees.
Fix Your Credit
Consumer debt that you’re paying interest on is a form of modern-day servitude because you end up working for the lender and have nothing left for yourself. Pay off your consumer credit cards and loans as fast as possible. Some people start by paying off the highest interest rate; others recommend paying off the lowest amount first, so you stay motivated by the little wins. Check your credit report regularly and report any errors.
Save, Save, Save
Once you are no longer paying interest on consumer debt, you can start saving. You may be tempted to buy the next shiny thing with your newfound funds, but think about other things you would like out of your life and stay focused on that. Maybe you would like to take an extended trip through Italy, send your children to private school, or have enough money to start a business. Dream big, and dedicate yourself to achieving your goals
Give to the Needy
Give ten percent of your income to someone who needs it more than you do. If you’ve been living paycheck to paycheck, this may feel impossible. However, it is possible, and it comes back down to habits. The habit of giving eliminates the scarcity mentality and is good karma.
Immerse Yourself in Healthy Finances
Changing habits is difficult. If you didn’t grow up around good financial choices, you might not even know that there is another way. There are resources to help you achieve your goals and go beyond the lifestyle you live. Take to the internet, and you will find a wealth of information. Scrolling through the financial section of Reddit or Quora will open you up to topics that you may have never considered. Check out Don Gayhardt on Quora, and start familiarizing yourself with financial terms and issues. Follow other leaders in the financial industry on Instagram and Facebook, and immerse yourself in the culture.
Buy Assets, not Liabilities
Once you have applied all of the above suggestions, use your money to buy things whose value will grow. If you’ve never invested, it can be challenging to know where to begin. A simple way to get started with just a thousand dollars is to open a Roth IRA. T. Rowe Price and Vanguard are reputable companies that have low fees and low minimum investment. Have ten percent of your income automatically deposited into your Roth IRA account every pay period, and you will notice your balance grows by more than what you deposit. With a Roth IRA, the IRS will penalize you for taking money out before you turn a certain age. However, that applies only to the profits, and not to the money you contributed.
People use money every day, but most don’t know much about it. Becoming financially literate and developing good financial habits will fundamentally change your life. Take it one step at a time and celebrate your wins!