Financial security isn't just about paying your bills on time, it's about securing your future. It means having enough to cover your essentials and having a safety net for surprises and long-term goals like retirement. We know it can feel overwhelming when you're first trying to understand and create a roadmap for financial security, but it doesn't have to be. Get a good understanding of your situation and start with small, easily achievable goals.
Let's go over five tips for you to get started on the path to financial freedom.
1. Create a Budget
Budgeting is all about taking control of your finances. It helps you see how much you are saving and spending as well as how much is going toward debt. Your budget should be a dynamic tool that evolves throughout your life, to help you reach your financial goals faster. The best place to start is by adopting the 50/20/30 rule.The basic rule is to divide after-tax income, spending 50 percent on needs, directing 20 percent to savings and spending 30 percent on wants.
2. Pay Off Debt
Debt can be a major financial burden. Make a game plan to tackle it head-on. The sooner you pay it off, the more money you'll have to save and invest. Make paying off your debt a priority, but while paying off one debt balance such as a credit card, be sure you aren’t creating additional debt balances on another credit card. And, you'll still want to add to your savings for emergencies.
3. Start Saving
Saving money is essential for financial security. Start by setting aside a small amount of money each month and gradually increase the amount as you can. A good rule of thumb is to have 3 to 6 months’ worth of living expenses set aside in case of an unexpected event such as a job loss. Consider putting your savings into categories for short-term and long-term goals so it's easier to track and put money toward your life plans.
4. Invest Wisely
Investing your money can help grow your money. There are many different investment options available, so do some research to find ones that are right for you. Learn about stocks, bonds, mutual funds, and other investment options. Diversify your portfolio and watch your wealth grow over time.
5. Start Your Financial Education
The more you know about money, the better equipped you will be to make sound financial decisions. There are many resources available to help you learn about money, such as articles, books, websites, and financial advisors.
Key Takeaways
- Financial security is like a marathon, not a sprint. Keep chipping away at your goals, and they'll eventually come within reach.
- Dream big but set achievable goals. Trying to do too much too soon can lead to frustration. Take one step at a time.
- Life can throw curveballs — adjust your financial plans when necessary. Adaptation is a key trait of financial success.
- Don't hesitate to ask for assistance if you're new to the financial game. Financial planning advisors can be invaluable resources to kickstart or help you continue your journey to financial security.
Embrace the challenge, celebrate your victories, and keep working for a future filled with financial freedom. If you have questions about your budget, a Personal Banker from FNBO would be happy to answer them. Give us a call today.
