Regardless if you’re mid-career, recently graduated from college, or plan to buy a home with double French doors, you need to think ahead to ensure that the process of transitioning from working to retiring is seamless. We all want to live in a way that enables us to be comfortable and financially secure in the future. In order for you to do this, you need to start financially preparing for the future as soon as possible. Here are five ways you can set yourself up to have a financially rewarding life in the future.
1) Monthly Budget
It may sound cliché, but financial freedom starts with establishing a monthly budget. In the event that you never developed a budget before, and let your finances go and come without much insight, chances are that you aren’t financially prepared for the future. One unexpected situation can devastate your income and ruin your efforts. This is why you need to start budgeting because budgeting is regarded as being one of the basics of financial planning.
Creating a monthly budget is easy. It starts with writing down all your monthly expenses such as utilities, transportation costs, and mortgage/rent payments. The key thing to remember is that you have to be honest about the amount of money you spend on everything from bills to entertainment and even vices. Once you have a sum total of your monthly expenses, subtract it from your monthly income. This will give you an accurate picture of the total amount of “free money” you have to save or invest.
2) Reduce Debt
If you own multiple credit cards or even use specific credit cards to pay off debt for another credit card, stop. In all actuality, all you really need is one, maybe two credit cards. The more credit cards you possess, the more money you’ll spend on paying fees. Over time, the fees associated with owning and using multiple credit cards can add up over the years. Ideally, to ensure that you have a financially secure future, you should take care of all debts as soon as possible. This entails car payments, mortgage payments, student loans, and credit card bills. Some other tips to consider, include:
- Pay bills on time
- Avoid taking on new debt
- Focus on paying off high-interest debt first
- Consider getting a debt consolidation loan
- Speak to a credit counselor about creating a debt repayment plan
3) Save Your Money
Being ready for the future entails saving more than you spend. Most personal finance experts suggest that you should establish a savings account that you’ll only use in the future. One of the ways you can start doing this is to see how much money you have left after taking care of your expenses and to save a percentage of those “free funds.” Some of the other things you can do to save money include:
- Cancel automatic subscriptions
- Budget yourself when you go to the grocery store
- Use a streaming platform as opposed to cable
- Set up your bank account to autosave a percentage of each paycheck
- Sell unused items or donate them and get a tax write-off
- Lower your cellphone bill
- Reduce energy use. Replace old appliances with Energy Star appliances
4) Develop a Retirement Plan
It’s never too early to plan for retirement. You need to develop a retirement plan and stick with it. There are various government and employment programs that help people prepare for retirement. Some of those include a 401(k) plan or Self-Managed Super Funds (SMSF). Financial planners specialize in helping individuals prepare for retirement, so that is one option that you can utilize as well.
5) Change Your Perception of Money
In general, the typical perception of money is that if you can afford the most expensive and newest item, you should get it. Some people develop an idea that they need to “keep up their appearances” so they spend more than they can really afford to. That’s why you need to change your perception of money. You don’t always have to get the most expensive model. In some instances, you may not even need to buy a particular item new. For instance, if you work as a landscaper and need work clothes, you can visit the local thrift store as opposed to buying expensive clothing.