Building Financial Strength
Do you consider yourself financially strong or weak or somewhere in between? No matter where you fall in the continuum it’s possible to build up your financial muscle. In the same way you build physical or mental strength through exercise, so too can you create financial strength.
The foundation exercise is goal setting. Everyone knows you can’t get anywhere if you don’t know where you’re going. Goals are the map to get you there. What is your ultimate financial goal? To buy a house? To have $100,000 saved in the bank? To clear out your credit card debts? That is your long-term goal.
No one achieves their long-term goal in a single step. There are many intermediary steps in between. Write out intermediary goals you can achieve on the way. Include actionable steps you can take to keep you on track.
For example, I will create a budget by X date. I will have saved Z amount by Y date. Give yourself deadlines and hold yourself accountable. Achieving short term goals is affirming. It motivates us to press on to the next one and the next on the way to that long-term achievement.
I know how much I make every month and I can regulate my spending in my head as I go along day by day. However past experience tells me, without following a budget, my estimations of how much I can spend always overshoot the mark. To build strong finances the first step is learning to live within your means. Always. The first step to doing that is tracking your spending. All of it, every day for a month. Subtract your fixed costs and create your budget with the rest. There are all kinds of free apps to help you with this. The Balance did the legwork and compiled the best budgeting apps of 2019 here.
Maximize your dollars
Let’s say your budget includes $150 a week for groceries. There are all kinds of ways to spend that money. For instance, you could go out and buy expensive cuts of meat, exotic ingredients for a special dinner you’re going to make, and lots of prepackaged snacks and other impulse items that you bought because were hungry and – and only eat for five of the seven days. Stretching your dollars at the grocery store is easier than you think. Don’t shop when you’re hungry. make lists, look for specials. It just takes some organization.
Coupons are also a great way to get more for each dollar. So is searching for deals online before ever setting foot into a mall. Planning is weight lifting for your financial muscle.
Get rid of debt
Debt is the extra weight we all carry around. If you have debt then the extra dollars you accumulate through everything else on this list should go toward clearing it. There are so many ways of tackling this. One of the most popular is the snowball method – which means paying off your debts from smallest to largest. It works because the satisfaction of success keeps you motivated to continue. Pay the minimum on all your debts, except the smallest one. Pay as much as you can on that one to pay it off as quickly as possible. Each debt you clear will motivate you to move on to the next one.
Include savings in your budget
You work hard for your money. It’s only fair that your money should repay the favor and work hard for you. Ideally you should be saving 20% of your income with 12% to 15% of that going toward retirement accounts. If you’ve got debt to pay off that needs to be your first priority, but once you’re able set up automatic withdrawals. Let compound interest take on the heavy lifting!