2019 is upon us, and there is a growing financial concern happening with so many Americans that need to be addressed. Individuals are finding making ends meet strenuous and the wages in America don’t seem to be changing as fast as the accumulation of debt among its citizens. People are making horrible purchasing decisions, and although investing has become a wider known topic, not many are pursuing investment opportunities. All of these behaviors seem to be stemming from a “Living for today” mentality, which is dragging down the financial success of those seeking it.
With all of these elements affecting the finances of today’s hardworking people, and with drastic increases in debts per household, what’s the solution?
It’s time for people to start striving towards financial freedom by utilizing financial education tools to begin building foundations for healthier wallets. Instead of going shopping this holiday season and spending unnecessary amounts of money consuming the newest products, how about you invest in your financial future instead, to ensure a successful start to next year.
Understanding your Finances
The first step to building a solid financial foundation is understanding the current state of your finances. Are you drowning in debt? Do you have spontaneous spending habits that wreak havoc on your bank account? The health status of your funds is critical to know to remedy them and begin to build a growing financial portfolio properly.
Here are a few steps you can take to begin assessing the state of your current finances:
What are your current streams of income and how well are they serving you? What type of monies do you receive on a regular basis that contributes to the balance of your bank account? These are essential questions to ask yourself when assessing the state of your finances. Income sources don’t necessarily have to be “jobs,” in today’s economy you can make money also providing shared services.
Do your income sources require you to spend money to make money? If so, it’s time to budget to see how much money you’re actually receiving regularly by calculating the possible expenses needed to complete your tasks. For example, if you provide ride-share services to help make ends meet, how much do you spend on gas in contrast to how much you actually earn?
Do you sell a product or service? What are the expenses that are needed to be spent regularly to produce your product or conduct your service? These are questions to consider when becoming familiar with your financial status. You may be surprised at the actual amount you earn compared to the idea you had of how much you make.
Spending habits, bills, debt, personal care, and so many other things affect your balance on a daily, monthly, and yearly basis. These expenses have to be calculated before their time of payment so that you can adequately understand your financial state. Many individuals have expenses that are hidden and also expenses that can be controlled or eliminated altogether, freeing up monies for other uses.
Expenses can also stem from streams of income. To get to work and back home again, you have to spend on gas. When at work you may become hungry and have to purchase lunch. On the way home from work you may stop to buy groceries. Expenses arise throughout the day and being aware of them can keep them from completely ruining your bank account balance.
Monitor the money that you spend on a daily basis. Many banking apps have features which allow their users to control spending habits and expenses while providing solutions for freeing up cash from unnecessary expenses.
Create a Budget
Creating a budget can relieve the anxiety of financial uncertainty. A budget is a financial plan created by analyzing one’s finances and creating practical step-by-step instructions for achieving a financial goal. Budgets can be designed to accomplish many financial goals such as paying off debt, saving for your bucket list, or just creating more financial stability in your life.
Here are some steps for starting an effective budget:
Determine your income
To begin your budget, you must first determine how much you make on a weekly, monthly, and yearly basis. These will be the numbers you will be working to adjust each month higher than the last. Income can be determined as actual income or possible income. Actual income is the correct amount you make each month including extra funds or any monies which are added to your account.
Calculate all of your expenses
After you calculate your income, it’s time to calculate your expenses and subtract that number from your actual income. The amount of your expenses can be derived from your financial files, bank statements, receipts, and bills. It can be hard to accurately calculate the amount you spend each month without a banking app which can track your spending and bill pay. When calculating your expenses, for a more efficient budget add an extra 10 to 15 percent to the amount determined to be your expenses.
Calculate savings and investments
The number calculated from subtracting your expenses from your income should be your savings, although many consider this money to be expendable. Savings can be used to strengthen your financial foundation, and when applied to investments your savings can also grow your finances. Instead of spending this money, put it to work and create passive income by applying your savings to investment opportunities. Investment opportunities can provide a better use for your savings than the money just acquiring interest from sitting in a bank.
Create financial goals for your budget, what is your financial mission? What are your intentions for your money within the next five years? This is the question you are asking yourself when setting your financial goals. Building a financial foundation and growing it to economic freedom should be your primary goal, while other goals will stem from this primary objective.
Create a financial journal which records all of your monthly financial transactions to see your budget progress. By documenting your economic development, you will become inspired to create and achieve more financial goals.
Assess financial progress
As you record your progress, frequently correct financial habits that are affecting the achievement of your financial objective. Assessing progress might be to adjust your restaurant spending by cooking instead of going out to eat as frequently. Make sure to record all changes in habits which affect your budget.
Adjust budget and goals
When financial goals are accomplished; you should always adjust your budget to serve your financial growth better. Improving your budget frequently will ensure healthy financial progression and strengthen your financial foundation.
By applying some of these financial strategies, you can begin creating an effective financial plan that will help you to establish a secure and firm financial foundation for wealth building or just financial freedom in 2019.