With a new year and a new decade just right around the corner, have you started thinking about your finances? While you’re setting your new years’ resolutions, it’s essential to take into consideration your financial goals too.
Building a financial foundation is crucial, and affects everything we do from buying a car or a home to signing a new apartment lease, plus the peace of mind knowing that you can cover unexpected expenses.
If you’ve thought about improving your financial standing for the future, 2020 is the year to start! Here are some tips to help you develop goals and put you on track to financial freedom!
Where Do I Begin?
The first step in developing a plan for financial freedom is to look at where you are today. How can you know where you need to go if you don’t know where your finances stand currently?
You need to know what your spending habits are, and how you can improve upon them or change them to meet your new goals. Start by reviewing your spending throughout 2019 by looking over your credit card and bank statements.
When you’re evaluating your spending, ask yourself the following questions:
- How much did I spend on necessities?
- How much did I spend on extras?
- Where is it obvious that I’m overspending?
- What do my savings look like compared to my spending?
- Did I make purchases I don’t even remember buying?
By reflecting on your spending over the past year, you’ll start to see where you may have been overspending and what things you can cut out to direct that money towards your goals.
If you spent a considerable amount of money on eating out, think about ways you can curtail that spending by meal prepping for the week ahead.
Steps to Prepare for Financial Freedom in 2020
Now that you have a picture of your current spending habits, and where your money is going, you can start looking at how you can change your practices to move towards your goals. Financial freedom isn’t a pipedream.
Still, it will take some budgeting, planning, and actively pursuing resources that can help you along the way.
Refine Your Budget
Creating a budget and sticking to it, is the first step in getting your finances under your control. Start by finding out your fixed and variable expenses.
Fixed expenses are things like rent or mortgage payments, your cellphone bill, monthly subscription services like Netflix or a gym membership. Variable costs fluctuate from month to month and can include things like your groceries and toiletries.
It’s important to get actual amounts for this exercise, not estimates.
You’ll also want to develop a savings goal at this point, that is in line with your financial goals. Think about setting up an emergency fund because it’s always a good idea to have money in case something comes up unexpectedly.
Take your monthly income and subtract your fixed expenses and varied expenses, as well as what you’ve decided to put towards your savings goal and emergency fund. What’s leftover is what you have left for “fun things” like entertainment, going out to eat, or purchasing things you don’t need, but just want.
Congratulations! You now have a budget!
Now make sure that you keep it easily accessible so that you can refer to it and track your expenses against what you’ve budgeted. A simple spreadsheet works for this.
There are a ton of apps out there that allow you to do this as well, and if that’s easier for you, you can check one of those out.
Check Your Credit
When you’re building financial goals, usually there is a reason behind them like a large purchase. Whether you want to buy a house or a car, or even start your own business, you’ll need to make sure that your credit history is up to par.
Your credit score tells a prospective lender whether or not you are responsible with your money, and is a requirement when applying for a mortgage or car loan.
To find out where your credit stands, request a free credit report online, and review it carefully. Check your history for any errors, and if you find them, address them immediately. The longer they stay on your report, the harder it is to get them off.
You’ll also want to check your credit score as well, as this is the first thing a lender will see when they pull your report. Credit scores can range anywhere from 300 to 850. You’ll want to get your score as close to 700 or above as you can. The better your score, the more likely a lender will offer you a line of credit, and you’ll get better interest rates. Here are tips to build your credit fast.
Hire A Credit Repair Company
If dealing with your credit report errors and getting your score up seems overwhelming to you, it’s a good idea to look into hiring a credit repair company. A credit repair company can improve your credit and deal with inaccuracies and errors in your report for you.
You have outstanding debts that you need to address, a credit repair company can work with you and your budget to come up with a detailed plan to get your credit score back on track. They have the resources and expertise to handle these issues for you, and they can get it done quickly.
Should your credit history needs a facelift, a credit repair company can definitely help you get there and is an investment towards achieving financial freedom!
Practice Mindful Spending
If you have significant financial goals set for yourself, you’ll need to start being mindful of how you spend your money. This means that you need to identify the differences between your needs and wants.
Your needs are necessary for your survival, like food and shelter. Wants, on the other hand, are “nice-to-haves” and include things like a nice car, a vacation, or that pair of killer stilettos that you don’t have many places to wear them to, but want them anyway.
For many of us, the line between wants and needs often blurs.
For example, if you’re going to a wedding, you may think you need to buy a new dress or suit, even though you have a closet full of outfits that you can wear. By practicing critical thinking about our needs and wants, and evaluating necessity versus nice-to-haves, you’ll find ways where you can save money.
Outside of your needs and wants, also practice mindfulness when it comes to buying things for other people. There’s no need to go overboard with holiday spending.
Most of your family and friends just want to enjoy your company, and while it’s nice and feels good to give gifts during the holiday season, it truly is the thought – not the price tag – that counts!
Ditch Your Debt
No matter how you slice it, getting rid of your debt is always a good thing to do. The quicker you can pay off your debt, the faster you can start putting that money towards achieving your financial future.
To give you an idea of how much money you can free up by paying off your debts, take a look at how much you pay each month for credit card bills, student loans, and other outstanding debts like car loans.
If you can free up that money and put it towards securing your financial foundation, you’ll be well on your way to achieving your goals.
Attack your debt by prioritizing those with the highest interest rate. You’ll end up saving more money by paying less interest on your outstanding debts. Sometimes, it takes longer to see the results of doing this, but don’t get discouraged.
Adding just an extra $100 towards your highest interest debt each month brings you $12,000 closer to paying it off at the end of the year!
Save For A Rainy Day
One thing that every personal finance expert includes in their suggestions to those aspiring toward financial freedom is to build up your savings. This helps you build a stable emergency fund if the unexpected occurs.
If you’re not a natural saver, this can be tricky to navigate. Fortunately, there are apps that allow you to round up each purchase you make on your debit card to the nearest dollar. It can automatically deposit that amount into a savings account or invest it for you.
It happens behind the scenes, and you don’t even have to think about it automatically putting money into your savings. You’ll be surprised how quickly spare change can add up!
There is always room for improvement on the road to financial freedom, and 2020 can be the year that you achieve that. These tips are meant as a starting point for you to get an idea of what it will look like to get yourself on-track and on-budget.
If you would like expert advice and a clearly defined plan that’s personalized for you and your specific goals, consider contacting a credit repair company. They have the know-how to help you identify critical areas that you should concentrate on, come up with a budget, and provide you with a detailed plan on how to move forward.
Put your best foot forward, and invest in your financial freedom for this new decade ahead!