The quality of your life may depend on your financial health. Money problems can cause stress leading to mental, emotional, and even physical problems.
Being in a cycle of debt is never healthy. Having no emergency fund, especially if you are supporting a family, is borderline reckless. Not investing in the future is like leaving everything to chance.
That’s why there is no better time to take charge of your finances than today. Now. You will miss opportunities for growth if you’ll wait a long time to act.
Before Saving and Investing
But before you get too excited about managing your finances, or deciding to invest in real estate and stocks, here’s what you need to do first.
Begin with a budget and assess your situation
A budget may seem rudimentary, but you cannot begin improving your financial state without a budget that works. Setting a budget allows you to assess if your income meets your needs and expenses. If not, you can find ways to either reduce your expenses or increase your income stream.
Assess your financial situation. What are your current loans? How much are you still paying for your student loans? You must face this head-on without beating around the bush. If you are in deficit, face the fact. Admitting to yourself that there is a problem is the first step to solving it.
Check for consolidation and repayment options
One example where consolidation can help you is with your federal student loans. If paying for your student loans is taking too much from your budget, you can look for loan consolidation and refinancing options.
Taking on a refinancing option can help you allot a larger chunk of your income to your retirement and emergency funds. Consolidation can also combine several federal student loans into one, so you will only have one monthly payment to think of.
The Department of Education can also give you a new loan term with an adjusted interest rate. It also allows you to have a longer repayment period to lower your monthly installments.
Review your monthly expenses
Review the budget that you made and identify which expenses you can eliminate and reduce. Of course, there are items that you cannot take out, such as your mortgage or car loan payment. However, you can take practical steps to reduce your electricity bill. If you’re already using streaming services, you may consider cutting off or downgrading your subscription.
Ditch the credit cards
Using your credit cards for your purchases is convenient. In fact, it is too convenient that you can just swipe away to buy that new pair of shoes without a second thought. You can end up with a huge debt without even noticing it.
Use cash for your purchases if you want to have full control of your expenses. You will avoid buying unnecessary things that you cannot afford to pay in cash.
Pay your debts
Pay off debts with the highest interest first. List down your existing debts, with the minimum amount that you need to pay for each. For credit card debts, it will help to pay above the required minimum payment.
Secure your family’s future
Taking a life insurance policy may seem like an additional expense, but it’s a must if you have people relying on you. You wouldn’t want to leave your family with nothing in case something unfortunate happens to you.
Grow Your Wealth
The next step to taking charge of your financial health is to grow your wealth. Here are the things that can help you move toward financial freedom.
Build your emergency fund
No one can predict life’s uncertainties. Whether it’s a simple repair job or you need a new phone, an unexpected expense can set you back financially. If you’re not prepared, you may end up taking another loan.
Grow your retirement savings
Your retirement may be too far off from your mind, but the sooner you start saving for it, the more beneficial it will be for you. You can have compound interest work for you, and you have time on your side. You can invest in high-risk yet high gain investment vehicles.
Now is also the perfect time to open an individual retirement account. You can open a traditional IRA, where the contributions that you make are tax-deductible. However, you will need to pay the taxes when you withdraw your retirement money in the future.
You can also pay for the taxes upfront with a Roth IRA. Another option is to have a self-directed IRA, where you can have different investments under your account. With the help of a custodian, you can invest in other assets, such as real estate and franchise businesses.
Explore other retirement investments
You can also explore other retirement investments to augment your IRA. You can invest in fixed annuities or mutual funds to grow your retirement savings. Since these funds are not bounded by contributions and withdrawal rules as with your IRA, you can withdraw them earlier without any early-withdrawal penalty.
Working on your financial health is your responsibility, not just on yourself but on the family that depends on you. Get your finances in order today; your future self will thank you for it.