Financial success means different things to different people. To some, it may mean having a few million in the bank, for others, it may mean simply being able to live a comfortable life or send their children to college without incurring a great deal of debt.
While there are different ways to define financial success, there is only one real way to achieve it and that is to manage your money responsibly. But, how can you do that? Check-out these five simple financial strategies that can help you achieve financial success and put more money in your pocket.
Step 1: Pay down Debt
It may be tempting to pay only the minimum amount due on your credit card bills or student loan. However, not only can this hurt your credit but also add up to hundreds of dollars over time. The key to paying your bills on time is putting them on auto-pay or user account management or bill reminder service via email or text.
If you have any other debt that has high-interest rates then that too has to be tackled with determination and strategy. There is no quick way to dig yourself out. It is time to buckle down on your spending and cut out luxuries like frequent dinners out and cable T.V. Any dollar of debt that you pay off is a dollar closer to financial freedom. You can do it!
Step 2: Build Up Savings
The key to financial success is “paying yourself first”. The trick of this strategy is to set aside 10% – 20% of every paycheck towards an emergency fund. You should aim to save at least six months’ worth of living expenses. This will not only protect against future debt but also help you save for future big-ticket needs. The surest way to get there is by setting up bi-weekly or monthly transfers and also putting in all raises, bonuses, birthday checks and other windfalls to a savings account.
However, once you have set up an emergency fund, use it only for true emergencies and rebuild it as soon as the money is spent.
Step 3: Take Advantage of Workplace Benefits
Many people think that the only benefit they get from their employer is a paycheck. But you may find that your employer offers other benefits too. A financially successful person will understandably take advantage of these benefits which are relatively cheaper or free, such as:
- Employer 410K match: You should take advantage of this as it is free money. Contribute the minimum to get the employer match and make sure you increase your contribution a bit too as even a 1% increase is progress towards your goal.
- If you do not have a 410(k) then you can open an IRA easily online.
- You could buy group life coverage to supplement your life insurance policies.
- Inquire about the availability of Health Savings Account (HAS) or Flexible Spending Account (FSA) incentives.
All these benefits can lower your taxable income and make you money.
Step 4: Have an Annual Insurance Check-up
Take time to look at all your insurance policies as no one wants to be over-insured. Nor does one want to be under insured and be unpleasantly surprised when making a claim. You should also make sure that you are covered with short-term as well as long-term disability insurance, auto insurance homeowners and health insurance. For example, you may be over-insuring your auto or home by going with a lower deductible. If you have cash available then you should go with a higher deductible insurance plan that carries lower monthly premiums and save money.
Make an appointment with your provider and confirm if your coverage is exactly what you think you are paying for. You should also inquire about ways to lower your premiums and ask about any discounts for good driving, loyalty, bundling multiple policies, etc.
Step 5: Earn More Than You Spend
Adjusting our lifestyle expectations is hard to achieve. So we need to make some adjustments to reach our financial goals. There are three options spend less, earn more or both. However, the best option is to earn more and spend less. The key to this is to establish a financial plan. This may sound overwhelming but creating a financial plan can be very simple as it is simply setting goals and laying out how to achieve them. You could start by just writing down your income, how you spend it and your goals. You could also check out how to create a zero-based budget to achieve your financial goals. Once you have a system in place it would be easier to spend less than you earn and prioritize savings. You can also identify where your spending is out of control and decide how much to allocate to different categories like entertainment, transportation, or clothing and ensure that your outgoing expenses do not exceed your income. Saving off even as little as 5% of your expenses can save you thousands of dollars
When it comes to financial success –the kind in which you need not worry about money matters- the fable about the tortoise and the hare (“slow and steady wins the race”) still applies. But when you get a deeper understanding of the basics you can achieve whatever definition of financial success that fits you best.
Have you used any of these strategies to reach your financial goals in life? Share with us on our Facebook page.