Money is the root of all evil—or at least one of them. It's also the source of freedom, security, and excitement in our lives. No matter where you stand on the wealth spectrum, you can take steps toward financial independence by learning to manage your money wisely and carefully manage your debt. Let's explore some ways that will help you achieve this goal!
Take stock of your debts.
To get started, you need to create a debt list. This is where you list all your debts and write down the balance of each debt, along with its interest rate. This will help you see what kind of financial picture you're dealing with before making any decisions about how to pay off your debts.
Next, go over everything on your new debt list and write down the minimum payment for each one—and don't forget to include any extra expenses on some of these that would make them faster to pay off! It's important because it shows how much money is going toward paying off your monthly debts and lets you know when they'll be paid off completely (or close enough).
Make a plan for debt repayment.
Setting a goal for how much debt you want to pay off and how long it will take is essential. For example, suppose you have a five-year student loan with 4% interest and $35,000 in the remaining principal balance. In that case, you might decide that your goal is to pay it off within three years. This means finding ways to save $1033 per month toward the loan—or around $83 per week.
The first step is ensuring those payments won't strain your budget or put other expenses at risk. If the only way you could make this plan work would be by going without food or clothing (or some other essential), then it probably doesn't make sense—but if there are some areas where we could cut back on spending and increase our savings rate instead of just taking out more loans? Then great!
Consider credit card consolidation.
Consolidating your credit card debt may be a good option for you if:
You're having trouble making minimum payments on your credit cards.
You're paying an average of more than 20% of your monthly income to pay off the balances alone.
Your credit score has fallen below 600 and hasn't improved much after two years. (A high FICO score is 720.)
How to consolidate: To find out if reducing is right for you, fill out an application with a reputable company such as Credit One or Capital One Freedom Visa Signature Card. They will review your financial situation and determine whether they can help you get out of debt faster through a balance transfer or interest-free card payment plan (depending on how much money you owe). If they approve you, they'll have one main goal: To get as much money from their customers' accounts as possible--and then some--to improve their bottom line. Thus, it's essential that before signing up for any kind of consolidation program, consumers make sure that all rates are clearly stated in writing, so there are no surprises later down the road when payments start coming due each month."
Manage your budget carefully.
You can't achieve financial freedom without a budget. You need to know where your money is going and why; otherwise, it will be impossible for you to plan for the future. A reasonable budget not only helps you manage your finances better but also allows you to save more money than ever before.
How do I create a budget?
Creating an adequate budget is something that many people struggle with. Still, with these tips, it should become much easier for you:
Start by writing down all purchases made by cash or check (i.e., A.T.M. withdrawals) each month. These include rent or mortgage payments, utilities, and phone bills; groceries; gas; transportation fees such as car maintenance fees; entertainment costs like restaurant meals out; clothing expenses like shopping trips; health care costs such as prescriptions or doctor visits; home maintenance tasks like painting services, etc.; insurance premiums, etc. If other expenses are recurring monthly, add them here, too (like gym membership fees).
Now tally up how much money was spent per category to know how much we need each month to cover these bills/expenses without having any debt left over at the end of each month. During this time, nothing additional was purchased (apart from necessities such as food). This number would be our "fixed monthly expense" figure, i.e., what we have left after paying all our fixed monthly bills/expenses, including rent/mortgage payments, etc.
Conserve cash by canceling nonessential services.
One of the best ways to conserve cash is to cancel those nonessential services that you're paying for but not using. For example, many people use cable to access local news and weather. Still, there are other ways to get this information online. You can also subscribe to a streaming service like Netflix or Hulu and watch some shows on your laptop or tablet if it's easier than watching TV.
If you're a member of clubs or gyms, consider canceling them if you don't use them regularly. If you belong to a gym where everyone is super fit and active, it may be time for a change; consider joining the Y.M.C.A. instead!
Increase your income.
The first thing to do is to examine your current income and then decide how much more money you'd like to bring in each month. If you're earning just enough for living expenses, that's an excellent place to start.
Look for side hustles if you want to earn more than what's needed for basic survival. Side hustles can be anything from starting an eBay business (selling stuff from your home) or making a few dollars on Fiverr (offering services) to working as a freelancer for larger companies or even starting an eCommerce business of your own.
If you're unsure where your side hustle will come from, brainstorm ideas until something feels right—you'll know when it happens! Then make time in your schedule each week/month/year toward building out this new money-earning endeavor. Set aside money designated explicitly toward this endeavor, so it doesn't get mixed into other spending accounts or goals by accident—this is important!
Be realistic about your goals.
Set realistic goals.
Don't set goals that are too high.
Don't set goals that are too low.
Don't set goals that are too far in the future.
It's easier to save money when you can see progress each month.
Track your spending. It's easy to lose track of what you spend and where especially if you don't have a regular income. One way to ensure that doesn't happen is to set up an account with Mint that allows you to link all your bills and track everything in one place. This can help prevent overspending on things like eating out or entertainment by making financial decisions easier by having everything in one place
Set up a budget so that it works for you. If this seems daunting at first, start small! First, create a budget that tracks only the money coming into (and going out) of your checking account—that way, at least at first glance, it shouldn't seem too complicated — then expand from there as needed/desired.
Financial freedom is within your reach if you're willing to do a little extra work. The key is to start small, keep an eye on your progress, and adjust as necessary. Even small changes can lead to significant results over time!