Managing your finances is difficult, especially with a limited income and more debt than it seems you can deal with. The road to financial freedom is long and hard, but it is not impossible. With some intelligent and strategic planning, you can set yourself on a path to financial ease eventually, even in this difficult time.
In this article, we are going to talk about strategies you could take in order to dig yourself out of the financial pit and into financial freedom.
1. Work towards independence from debt
Not all debt is bad, as having a good level of debt can actually help improve your credit score so long as you are paying for it regularly. But one of the most troubling things burdening a lot of Americans is a vast amount of credit card debt. And the trouble with a lot of debt is that it accrues interest over time, becoming more and more difficult to repay the longer it remains unaddressed.
Have an honest look at the amount of debt you have, and calculate how much you need to pay monthly so the amount doesn’t grow. Make sure to address the loans and credit card debt that accrues with the highest interest rates first. Try to look into local programs that allow a bank to purchase your debt so that you can consolidate all the money you owe to one entity.
2. Budget, budget, budget
It is important to allocate every dollar and cent to a purpose. Calculate all your fixed expenses—such as utilities and rent—and take these out of your salary first. A good rule of thumb is the 50-30-20 rule.
50% of your income should go to utilities and food, 20% for financial goals like debt servicing and savings, and 30% for personal use. In more difficult times, feel free to adjust these as needed, and make sure there is not a single bit of money that is not assigned to a purpose.
3. Prepare for emergencies
Murphy’s law states that anything that can happen, will happen. That means some great financial downfall will come at a certain point, whether it is a sudden health concern or an earthquake that leaves you with a gaping roof. Bad things will happen eventually, and the best thing we can do is to be prepared.
Allocate something—anything—to an emergency fund that is difficult to access. Emergencies are an eventuality that can be made easier with emergency money.
4. Curb your spending
You have to really ask yourself whether that daily drink at the local coffee shop is necessary, or whether or not you actually need the phone released last week. It might be time to take a step back and lower your standards of living by being happy living at a level you can afford.
Financial freedom does not come without its costs. It is important to sacrifice a little bit now so that you can achieve your financial goals and a higher standard of living with more sustainable means.
Setting yourself up for financial success is a hard and arduous task. It takes commitment, discipline, savvy, and sacrifice. It means curbing your desire to have immediate satisfaction, in order to achieve stability later on. This is a very difficult thing to unlearn, but not impossible. Just as financial freedom is not impossible.
And if you’re looking for more tips on financial freedom, send us at blackwallet a message. We have classes and resources that can help you get the stability you need.