When thinking about money, what thoughts come to mind? Do you stress over opening your credit card statement? Does looking at your budget make your blood pressure rise? Hopefully not, but if so, you are not alone. According to The Financial Health Network, 67% of Americans are not financially healthy. Yikes! If you are looking to achieve financial confidence, here are some actions you can take:
Set Money Aside in an Emergency Fund
You should aim to have at least 3-6 months of living expenses saved. Think about how nice it would be to pay for things outright instead of resorting to credit cards. Let’s face it, if you drive a car long enough, it will need new tires. If you own a house, the roof will need to be replaced at some point. If you have children, they will eventually break something – either an item, a bone, or both! Having money set aside for emergencies can help turn a catastrophe into a mere inconvenience.
Pay Off Your Debt
The best way to keep more of your hard-earned money is to eliminate how much of it you spend. Getting rid of your debt will help accomplish this in the long run. There are a couple of ways to pay off your debt. One approach is the debt snowball. Here is an overview of how this method works:
- Make a list of all your debts excluding your mortgage.
- Put these debts in order from least to greatest according to the amount owed on each.
- Pay as much as you can on the first debt (the one you owe the least amount on) while paying the minimum payments on your other debts. Apply as much as you can towards this first debt. Sell something, get a second job, and/or budget better to earn this extra money.
- After this smallest debt is paid off, use the money you were paying on it and apply it to the next debt on your list.
- Repeat with all your debt until you are debt free!
Many have success using the debt snowball because this approach helps change your behavior towards debt. Mentoro’s Manage Debt tool can automate this calculation for you and help make managing your money simple! Most get into trouble financially because of emotions. We buy stuff because it makes us feel good. In addition, far too many believe they cannot win with money and will always have debt. The debt snowball is like a diet in that you achieve small victories as you continue which builds confidence and encourages you to keep going.
Consider Reducing Your Credit Card Usage
Speaking of eliminating debt, a key ingredient of being debt free is to avoid taking on more debt. The only time you should consider using a credit card is if you have the money to pay it off in full every month. Buying something you do not have the money for and then being charged interest on top of the purchase price is not a way to achieve financial confidence. I know some credit cards offer rewards but, if you are not careful, the amount you will pay in interest will exceed any reward you are offered. The secret to financial success is not merely found in earning credit card points. Credit cards can be helpful tools, but they can also be dangerous if the user is not managing their money properly.
Spend Less Than You Earn
What is a surefire way to increase your disposable income? Spend less of it! It sounds easy, and it is, on paper. It can be difficult to say no and not have the latest and greatest gadget, but your income is your greatest wealth-building tool. Keeping more of it and managing your spending will help you achieve your hopes and dreams much faster.
Invest For Retirement
Most of us will not be able to physically work at some point in life. While Social Security should be there, living off that alone will not make our Golden Years golden. The longer you invest, the more time you will have to let compound interest work its magic. In addition, many employers offer some sort of match when their employees invest in the company retirement plan. This is FREE money that will help you build your nest egg. Do all you can to take advantage of this.
See if you can apply any of the above to help you achieve financial confidence!
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