How do you become financially secure when you’re struggling with debt and you don’t have much money leftover? On top of that, you might not know much about personal finance. Anyone can become financially secure, but there are a few steps that you must take to achieve it.
Compare Your Incoming and Outgoing Cashflow
At the most basic level, look at how much money you’re bringing in each month and how much is going out. If your outgoing is bigger than your incoming, you probably already know you have a problem. However, even if it’s the other way around, that doesn’t necessarily mean that you are starting out from a financially sound position. For example, if you’re carrying debt, that counts against your net worth, and you will need to pay it off eventually. You might also be spending too much and saving too little.
Consider Your Resources
Before going much further, think about what you could do bring in more money. Later on, you can drill down into specifics of what you need, but for now, just think about how you might be able to earn more cash. Ideas might include picking up odd jobs or gig work, taking a better paying job, taking a second job, or selling some things that you own. There may be a number of avenues you may not be aware of, so do some research. For example, you could roll your credit card balance onto a card with an introductory no-interest offer. Do you own a life insurance policy? If so, you might be able to sell it through a life settlement. You can review a guide to help you realize your maximum cash value that you could benefit in finally getting ahead.
Get Rid of Debt
You should get rid of as much debt as possible with the exception of a mortgage and perhaps student loans, although you should try to pay off the latter quickly. You should pay down your debts either based on which debt has the highest interest rate or which has the lowest balance. The former is more financially savvy but the latter is often more psychologically motivating.
Make a Budget
A budget will help you cut back on unnecessary spending and save more. If you’ve never had a budget before or you’ve had a bad experience with trying to budget, you might think of it as being restrictive. Change your mindset and think of it as a way to make your spending worry-free because you always know what your parameters are. Download one of the many budgeting apps to make this process nearly automatic.
The final step to financial security is having savings. This starts with an emergency fund, which should be enough to cover several months of expenses. However, to start with, set yourself a goal of saving $500. You should also be saving for retirement, through a program at work if your company offers one or individually if it does not. Beyond this, you may want to look at other types of investments.