Navigating the waters of personal finance can be a confusing and disappointing journey if you don’t know what direction to move in. No matter what your goals are, getting on top of your financial situation will make life easier for you. Here’s a short guide for how to regain control of your finances and live your ideal life.
Create another income stream as soon as possible
Reaching financial security is a difficult journey for anyone who wasn’t born into a supremely fortunate financial situation. In order to get ahead fastest, you should be budgeting, but it’s not the most important step you can take toward financial freedom. You should focus on creating more income.
No matter how much your take-home pay is, you can likely benefit from earning more. There’s a reason that starting a “side hustle” has sprung up in popularity over the last few years: It helps tremendously. What skills do you have? You can turn almost anything into a small business: Do walking, doing hair and makeup, crafting handmade home decor, freelance writing, and graphic design are five examples of side hustle opportunities. Start your own side project now and see if you can cultivate it into a successful, revenue-generating business by this time next year.
Factor debt repayment into your budget and pay it off as soon as possible
Rework your budget to include payments toward your debt. Getting out of debt will allow you so much more financial flexibility. The quicker you pay off your debt, the less interest you’ll end up paying. Also, once you’re debt-free, you can use that part of your budget to invest or to feed back into your own business.
Once you have an emergency fund, start investing
You’ve likely heard personal finance guru’s Dave Ramsey’s advice to save up an emergency fund of three to six months expenses. This is practical, actionable advice that should serve as your first financial goal after paying off your debt. Having a hefty emergency fund available as a safety net will probably come in handy more than once and save you from accruing further debt. Most Americans don’t have this kind of savings in their bank, so getting to this point is a financial feat worth celebrating.
When you’ve deposited your emergency fund, start investing. The money in your savings account will grow too slow to match inflation and you’ll be losing out on substantial interest by keeping all of your money in a bank. If you’ve never invested before, try starting out with bonds or index funds. These investments are less risky than buying specific stocks outright because you’re buying into a large group of companies instead of relying on just one stock.