It’s easy to lose sight of your overall goals when it comes to managing your money and investments to financial freedom. Remember that the main goal is achieving financial freedom. Here are five steps to staying on track for that objective.
Always Ask Yourself Why You’re Spending Money
Get in the habit of thinking about why you’re about to swipe that credit card or hand over cash for a purchase. Are you about to buy something you actually need? Be careful about trying to keep up with the Joneses. Ask yourself these questions:
- Do I really need this thing?
- Will I soon forget about it as it gathers dust in a corner?
- Am I trying to impress friends or family with this purchase?
- Will it improve my quality of life?
Using this habit of questioning goes a long way in eliminating unnecessary purchases and frees up more money that can be invested or saved instead.
Invest Some Savings Into Growth Vehicles
It’s important to invest in a vehicle that allows you to outpace increasing inflation. Don’t try to time the market or get fancy with stock picks. Instead, start out with a mutual fund that uses a variety of companies to spread your money throughout the market.
This is a good way to avoid trying to find individual stocks that may or may not perform well for your freedom. A mutual fund helps avoid taking unreasonable investing risks. If you aren’t sure where to invest, seek out financial advice Newcastle.
Get Rid of the Debt
Debt erodes wealth greater than almost any other money instrument. Be aggressive when it comes to paying down credit cards or other debts that are charging you at high-interest rates.
One effective strategy is called the snowball method. The idea is to pay the minimum payment on all your credit cards except for one. Select the debt that has the smallest balance and accelerate its payoff date by paying more than the minimum required amount.
Once that smaller credit card has been paid off, take the entire amount you were paying on it and add it to the minimum payment on the next smallest balance. After that next debt is paid off, repeat the same process with your third-smallest debt. Over time, your entire monthly debt budget is knocking out the larger debts on your list.
You might be surprised how easily you can lower monthly expenses if you pay particular attention to the goal. Here are some ideas:
- Do you really need the most expensive cable plan? Save some money monthly by going to their next affordable option.
- How much do you spend on Starbucks every month? Track it for 30 days and you might be shocked. Can you do away with a few of those coffees each week?
- Look for a different cell phone company that can shave down the cell phone bill.
- Can you change insurance companies and save some money there?
Be ruthless with what you’re spending your money on every month. Remember that reducing expenses is just as effective as raising your income.
Build up Your Emergency Fund
One thing that’s a sure thing in life is unexpected emergencies happen. Make sure you don’t have all your money tied up in investments where it’s difficult to access the cash when you need it at a moment’s notice. Use a savings account or money market account at your bank or credit union.
A good rule of thumb is to build your emergency fund to the point where it covers at least six months of monthly expenses. Even better is building it out to have the potential to cover an entire year’s worth of your monthly expenses. Of course, start where you can. Even one full month’s worth of expenses is better than having no emergency cash at your disposal.
Don’t wait to get an emergency fund in place. You’ll be really happy you have that cash on hand the next time the car needs an unexpected repair.
Put these five tips to use and you’ll be on your way to financial freedom.
Eric Reyes is a passionate thought leader having been featured in 50 distinguished online and offline platforms. His passion and knowledge in Finance and Business made him a sought after contributor providing valuable insights to his readers. You can find him reading a book and discussing current events in his spare time.