Maybe it’s just tax season, but around this time of year, I always start looking at my finances and really honing in on how I want to succeed financially in the months to come. While I’ve been blessed to escape the last year financially sound, I know many who haven’t. This got me thinking about the critical first steps I took, financially, when starting out. I’m sharing everything today in the hope that if someone needs a little financial advice, these tips can help.
Step 1: Identify the bare bones of your budget.
How much do you really need to spend monthly? I’m talking rent, groceries, phone bill, utilities, car insurance, renter’s insurance, etc. Break down your finances into the bare bones and then add $50 for wiggle room. Once you have that figure, begin saving, month by month.
Step 2: Build an emergency fund.
Start with a goal of $1000. Then, work towards what you need for 3-months of your bare bones budget. Next, aim for 6-months. Having an emergency fund is one of the most crucial things you can do to set yourself up for financial success.
Step 3: Start throwing money at any debt you have.
Start with the smallest amount and work your way up. With a gained momentum, it will feel easier to put money towards progress. Debt holds you back financially. Once paid off, it’s easier to plan for and envision a positive financial future.
Step 4: Begin saving for retirement.
Supposedly, a solid rule of thumb is that if you can, put 15% of your income towards retirement. Saving for retirement now is something you will majorly thank yourself for later.
Step 5: Consider long term savings.
What do you want in your life? Financial freedom? Travel? Extravagant meals? A large safety net? Consider what “rich” means to you and then begin building savings towards your five year financial goals. Once you’ve met those, head towards your ten year financial goals. Then, continue on.
I’m truly just scratching the surface with the tips above but I’d love to hear your thoughts in the comments below? Is money management your thing or are you running and hiding when it comes to finance?