Do you follow a financial plan? Do you have a clear set of financial goals? Are you saving and investing? Do you have your insurance up to date to and an emergency fund to protect you from the unexpected? These tips can help you get on the right path to financial prosperity.
1. Set Your Financial Goals
When you go on a journey, it is difficult to get somewhere without directions, and your finances are no different. Goal setting is the first step toward becoming financially independent. Your goal does not have to be large or earth shaking, it only has to be something that will help you accomplish something you want to do. There are many ways to set goals, and many different goals you can set. Here are examples of over 50 financial goals.
2. Spend Less Than You Earn
Spending less than you earn is the number one rule to get ahead financially. It sounds simple, but that is not always the case. Once you figure out how to start doing it, you will realize why spending less than you earn is the key to financial success, and you will wonder why it took so long to get going.
I am not rich, but I consider myself financially successful because I don’t worry about paying my bills each month, and I have a little left over when I am done. A key to this success is spending less than I earn.
3. Increase Your Income
More money! Great, count me in! But how? Well, there are several ways to do this – you can get a raise, get a promotion, take in a side job, or earn income from alternative sources.
I wrote about how you can start earning alternative income in the article 6 Streams of Income, posted as a guest article on the personal finance blog Moolanomy – The Science of Money.
Increasing your income can have a lot of positive affects, especially if you are able to continue living at your previous standard. You can then use your extra money to invest or do number 4 in this list…
4. Pay Down Your Debts
Debt sucks. Period. OK… let me rephrase that before too many people shout out about the benefits of student loans and mortgages. Consumer debt sucks. By consumer debt, I mean credit card debt, car loans, paying off the big screen TV, borrowing money for furniture, and taking out a payday loan to pay for groceries.
I am not saying people with debt are bad, that would be unfair. But debt makes it hard to get ahead financially and I would rather have my money working for me instead of working for someone else. I also don’t like knowing that I owe people money.
A great way to pay down your debts quickly is to follow Dave Ramsey’s Baby Steps and snowball your debt payments by paying your minimums plus adding whatever extra money you can find to the principal. Another way to pay down your debt quickly is to use a balance transfer credit card to transfer your credit card balance to a 0% interest rate.
5. Invest Your Money
Einstein has been attributed as saying “compound interest is the greatest force in the universe.” Whether or not Einstein actually said this (I wasn’t able to find a direct quote), I can’t argue with this logic. Compound interest plus time, is the force that will set you financially free.
Compound interest involves adding earned interest to the principal amount of your savings, and computing interest from the new amount. The next time interest is earned, it is earned from the larger amount, resulting in a higher principal. Repeat this many times, and your savings will grow exponentially.
The easiest place to find compound interest is in a savings account, but there are other methods of investing, such as stocks, bonds, mutual funds, real estate, commodities, and more. The point is, you want your money to work for you.
6. Invest in Yourself
You are your own greatest asset. No one else will take the time to make sure you have everything you need for yourself or your future. Your knowledge, skills, income, and other attributes will bring returns for years, so you should do your best to improve your odds of success.
Never stop learning. Take classroom courses, read and follow self-improvement books, get a professional certification, learn about personal finance (I highly recommend every blog listed in my blogroll), get healthy, lose weight, stop smoking, learn a language.
Invest in yourself.
7. Find Ways to Save Money
There are only two ways to have more money – increase income and decrease outflow (spend less). Obviously, saving money is important, and in fact, a penny saved is worth more than a penny earned.
Here are some things I have done to save money in the past year: Negotiate your cable bill, reduce your property taxes, use coupons, use Ebates for on-line savings ($10 free for signing up!), use rewards credit cards, save money on heating bills, or try any of these tips – 25 Ways to Save Money.
If you can incorporate some of these tips into your daily lifestyle, you’ll be surprised at how much money you can keep in your pockets every month!
8. Make it Automatic
Automation makes everything easier, including your finances. Most banks have free on-line banking which gives you no excuse not to take advantage of automating your finances to some degree.
Some things you can do to make your financial life easier: participate in automatic deposits if your employer offers it, automate savings transfers, automatically invest in 401(k), Roth IRAs, or other investments, have deductions automatically withdrawn, opt for automatic bill pay, and more. If you take it a step further and pay yourself first through an automatic transfer, you will find that saving becomes extremely easy.
9. Give and Ye Shall Receive
Be generous. Sharing what you have with others is both gratifying and can help change someone’s life. Charities make our world a better place, so if we are able to give, we should give. But you also have an obligation to make sure that your donations are going to an organization that you believe in and that your donations are going to be used properly. Be sure to investigate charities before giving, and avoid charity scams.
Bonus Tip – Have Fun
Life is not measured in dollar$ and ¢ents. Pay attention to the big things, and let life work out the details. You’ll enjoy yourself more and find out that in the end, the details are just details. 😉