If you are like most bill-payers, it might seem as though financial demands will never let up. From monthly musts, like mortgage payments and grocery bills, to pop-up spending for repairs and other unexpected costs; financial pressure comes from every direction. Although you may feel isolated as you sort out money matters, you are not the first to face financial uncertainty. Many have come before you, leaving worthy strategies you can use to improve your financial security.
Set financial goals and track your progress meeting them
Haphazard financial management leads to inconsistent results. On the other hand, setting near-term financial goals, as well as making long-range projections gives you something to strive for without losing sight of your immediate needs. Each person’s financial circumstances are unique, so your planning may not mirror another person’s. Your customized goals should acknowledge your existing financial obligations, setting milestones for improving conditions.
A one-year plan might include benchmarks like eliminating one credit card from your monthly balance sheet or setting aside money for holiday expenses in advance so you start the year without a mountain of seasonal debt. If you are saving for a major purchase, like a new car or property down payment, use your one-year plan to establish savings goals, pushing yourself to trim spending in favor of achieving long-term objectives like home ownership.
Five-year planning extends your outlook, accounting for life’s expensive milestones. Are you starting a family? Sending a child to college? Opening your own business? These and other major financial commitments call for advanced preparations. A five-year plan not only sets you up for future success, but the required discipline for meeting extended goals also improves your bottom line as you stick to the plan. For the best results, track your progress meeting financial objectives using periodic review to evaluate headway.
Reduce or eliminate debt
In modern, credit-dependent society, wiping out debt is a tall order. No matter how intimidated you are by the prospect of facing debt head-on, each move in the right direction translates into healthier personal finances. Using an incremental approach, prioritize payback with goals in mind. Identify which debts carry the highest interest rates, targeting your most expensive accounts for priority payment. And if possible, set your sites on a debt with a relatively low balance you can eliminate quickly. By reducing monthly credit obligations, you’ll feel the improved cash flow immediately, directing the resources to other priorities (such as paying off more debts).
Revolving debt spirals out of control, in part, because users are not held accountable each billing period. By paying the minimum payment amount, for example, credit card users do not keep pace with repayment, continually rolling over the debt and compounding costs. As you strive to reduce or eliminate personal debt, it is essential to freeze additional spending. And as accounts are reconciled, consider closing unneeded lines of credit to resist future temptation and improve your credit profile.
Cultivate financial literacy
Staying informed about financial and economic matters enables you to make timely, informed decisions. If you are preparing to buy a house, for example, it makes sense to track the real estate market in your desired area. Familiarize yourself with sales prices and the number of days homes are on the market before selling. With home-buying as a goal, you’ll want to assess various mortgage alternatives, consulting online resources for side-by-side comparisons. When personal funding is needed, you’ll land the best loan terms, using comparison sites to evaluate available borrowing options. With basic financial understanding and a sense of prevailing economic conditions, you’re well-equipped to face most household cash flow concerns.
With home-buying as a goal, you’ll want to assess various mortgage alternatives, consulting online resources for side-by-side comparisons. When personal funding is needed, you’ll land the best loan terms using comparison sites to evaluate available borrowing options. With basic financial understanding and a sense of prevailing economic conditions, you’re well-equipped to face most household cash flow concerns.
Financial knowledge and understanding can help you:
- Make the most of your income
- Secure the best financing rates
- Improve your retirement outlook
- Balance your budget
- Take advantage of a buyers’ market
Expensive missteps are hard to overcome, so learning by example provides financial tools without the high price of failing firsthand. Setting and tracking measurable goals, keeping personal debt to a minimum, and committing to the lifelong pursuit of financial understanding are three proven methods to be applied at any income level. Use these three practices to ease fiscal pressure and reinforce your financial security.