The road towards financial security is paved by what seems like an uphill battle of micromanaging your personal finances while still being able to support yourself comfortably. This is, for most of us, a constant challenge. However, by teaching yourself to become financially literate, you can set more realistic goals that you will actually be able to achieve. Having goals is something that enables all of us to lead productive lives, and it’s something important to have in finance as well. In this article, we’ll talk about the three types of financial goals you should be having, and how to achieve them.
Living on Less Equals Financial Security
This is a perfect short-term financial goal and one that could change your personal finance habits in the best way. By being able to live on less than what you earn, you will be able to allocate your money towards better things. This might include savings, paying off your debt, or even investments. Without learning how to live on less than your income, you will continuously be living paycheck to paycheck, trapped in a financial cycle that does not allow for an escape. Your goal should be managing your money in a way that you don’t spend more than what you earn.
Here are a few tips to achieve this type of goal:
- Practice the art of self-control. You don’t need to be stingy to be able to live on less. It’s all a matter of practicality. Recognize and assess the things you deem essential and allow only a few luxuries to make your soul happy – but never overindulge.
- Keep track of your spending habits. Take some time to review your financial situation. Track your income and spending so you can make certain adjustments for better cash flow.
- Create your own spending plan. Budgeting will always be beneficial to you. Develop a spending plan and set an amount to spend on expenditure every month.
Investment Equals Passive Income
Investing is one of the best ways to successfully increase wealth, and yet it is something that scares a lot of people. Of course, one could argue that investment is a lot like gambling. But unlike gambling, you can actually collect data needed to make smart decisions, in return creating successful ventures. You should start setting aside some money so you can dabble in the world of stock market. It’s not that difficult. There are plenty of tools, tutorials, and people who can help you better understand financial investing. This type of goal can lead to enough profit and a steady stream of passive income that could give you plenty of financial freedom and security.
Here is how you can start:
- Set aside a portion of your income for future investments. Depending on where you want to invest your money, it’s important to set aside an amount for a good start. Some investment brokers have a minimum starting spend ranging from $500.
- Start studying. Investing your money is something you can’t just do blindly Educate yourself on the basics of finance investment before you start.
Ask any personal finance expert, and they will end up talking about the importance of a retirement plan at some point. Everybody is saying it, but it doesn’t make it any less real. Planning your retirement plan as early as you can, will prove to be invaluable when the time comes. There are plenty of ways to start. If you are employed somewhere that offers a 401(k) plan, sign up. After you do, contribute as much as you possibly can. The more, the better. If you are self-employed, you can open Roth IRA account, for example. Either way, know your options, and it is never too early to start.
Here are a few more tips when it comes to your retirement plan:
- Set aside at least 5% of your gross income to your retirement plan. Time will multiply your retirement investment, so the more you put in, the bigger the benefits you will reap.
- Put in bigger chunks by using your tax refund, bonuses or raise. Whenever you find yourself getting a significant amount of money like a bonus, a pay raise or when you get your tax refund, consider putting a chunk of it on your retirement plan.