In 2019, 70 percent of Americans were struggling financially.
Considering that this was before the COVID-19 pandemic struck, and knowing its adverse economic effects, it’s safe to assume that the number of people who’re in a financial struggle has increased.
There’s no shame in struggling financially, though. Sure, it’s not an ideal spot to be in, but the good news is it’s not a life sentence. Anyone can achieve their personal financial goals – but this is easier said than done.
Imagine what you can do once you’re finally financially free. Buy whatever you want? Travel the world perhaps?
Before your mind dives too deep into a world of fantasy, let’s focus on what you can do to step closer to your financial goals.
Start by Setting Personal Financial Goals
We all want to be rich and wealthy. This is because most people think that being rich or wealthy is synonymous with financial freedom. Well, it’s not that straightforward.
Wealthy people might have it all – cars, houses, jets, and whatnot – but it’s hardly possible to say that a wealthy person in question has already met their financial goals. What if they have bigger personal financial goals that they’re still pursuing? You might think that a multi-millionaire has achieved their financial goals, but what if their goal is to be a billionaire?
The gist of this is simple: you need to have your own financial goals. Simply wanting to be rich or wealthy isn’t going to cut it. In fact, being rich isn’t a goal, really. And if it is, it’s an example of a bad goal. A good goal should be definite and measurable.
As such, start by setting your personal financial goals. This way, you will have a clear idea of what you’re chasing.
It’s advisable to break down your goals and create a timeline. For example, if you’re in debt like millions of other Americans, one of your financial goals should be to get out of debt. But that’s not enough, you need to establish the time by when you should have cleared that debt.
Another example of a good financial goal is to build savings. You can put a specific savings target, such as $5,000 every year.
Draw a Budget and Stick to It
A whopping 55 percent of Americans don’t have a budget to manage their income.
With such a stat, it’s easy to see why so many Americans are struggling financially. Any financial advisor will tell you that drawing a budget and sticking to it is the first step to developing control over your money.
If you’re the kind of person who can’t figure out where the money went midway through the month, it’s clear you need a budget.
However, it’s not just about creating a budget. It’s also about creating a budget that works for your finances.
To do this, it’s best to apply the 50/30/20 formula. 50 percent of your income should go to your primary expenses like housing and food, 30 percent to secondary expenses like traveling and gym memberships, and 20 percent to savings.
Write down your monthly income. If you have multiple sources of income, figure out your combined income. Split the income into 50/30/20.
Next, write down your current expenses and categorize them into three groups (primary, secondary, and savings). You can then determine whether your expenses are consistent with this rule.
If they aren’t, it’s time to make a change in your budget. For example, if you’re currently spending 60 percent of your net income on primary expenses, you need to scale back. This could mean moving to a cheaper house if you’re renting or adjusting your expenditure on clothing and groceries.
Be sure to stick to your budget; otherwise, your hard work in creating a budget would have gone to waste. It can take time to develop the discipline required to stick to a budget, but as long as you’re committed to achieving your personal financial goals, it shouldn’t be too hard.
If you’re an active saver, thumbs up!
If you’re already saving about 20 percent of your income, you’re doing a phenomenal job and it won’t be long before you achieve your financial goals. However, when you really want to go after your money goals, it’s important to save more.
Sure, in a tough economy where the cost of living is ever-rising it can be difficult to save more, let alone save at all, but if you practice frugal living, you can increase your disposable income, most of which you can then save.
Saving more is beneficial in many ways. Besides building a healthy fund for a rainy day, you will also be building investable capital.
Talking of investable capital, do you have any investments under your belt? If not, it’s high time you started. No one is too young or too old to start investing. Investing is one of the surest ways to achieve your personal financial goals.
There’s a wide range of investments you can make, depending on your financial state and preferences. As a beginner, however, it’s advisable to invest in high-yield savings accounts, CDS, and mutual funds. As you gain more experience and build more capital, you can start investing in stocks and real estate.
Seek Expert Personal Financial Planning Advice
Online resources like this article are a good place to start when you want to learn about personal financial planning, but they aren’t enough. It’s essential to complete your knowledge with the advice of a personal finance expert. Check out personal financial planning here to see the kind of help you can get.
Start the Journey Toward Your Personal Financial Goals
Every beginning of January, most Americans write down their resolutions for the new year. Achieving financial freedom is one of the goals that feature prominently. While most give up on this resolution soon after, it’s not impossible to achieve your personal financial goals. Put this advice to use and you’ll be well on your way.
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