Achieving financial success is like climbing a mountain. At the start, you can’t even see your end destination, and the summit can seem impossible to reach. But no matter how intimidated you might feel, the process of reaching your goal is simple: Take it one step at a time and don’t give up.
Everyone wants the financial success and comfort that come with building up savings, planning for retirement, and managing your money wisely. But that success often feels elusive, especially if your current financial picture includes high amounts of debt, little to no savings, and paycheck-to-paycheck living.
Even in what seems like a tough situation, though, there are ways you can build toward long-term financial success. Use these seven tips to lay the foundation for better finances in the years to come.
1. Open a savings account.
Before you start saving in earnest, set up a fund where you can set aside your money. Choose a savings account that will generate interest on your saved money over time, and consider setting up automatic contributions to force yourself to save on a regular schedule.
Experts also recommend setting up a savings plan that diverts a certain dollar amount or percentage of your income directly into savings. As you build up your savings, you may also consider using this money to fund investments and a retirement account.
2. Don’t get complacent with your current income.
Most financial planning accounts for a steady increase in income over time. This can come in several forms, such as incremental raises for longevity and/or performance, income adjustments to match inflation, promotions within your company, and/or income increases that come with moving to a different employer.
Over the course of your working life, you should seek out opportunities to increase your income when possible. Ask for raises if you think you deserve them, negotiate higher earnings when taking a new job, and be on the lookout for new career opportunities that raise your income and allow you to save more.
3. Spend less than you earn.
No matter how much money you make, there’s always an opportunity to save if you can reduce your spending to be less than what you earn in take-home pay.
If you’re able to stick to this financial goal early in your career, when your earnings are likely at their lowest, you’ll be able to increase your net savings over time as your income increases and your spending remains under control. When income increases come your way, you can divert most of those gains into savings and investments, all thanks to the spending habits you developed years ago.
4. Avoid piling up credit card debt.
Working to pay off any debt you carry is an important way to pursue financial freedom. However, if you have credit card debt, you should consider prioritizing paying it off over other kinds of debt. Credit card debt often carries high interest rates that can become a burden if you carry over a balance every month.
If you have credit card debt, create a debt repayment plan to pay off these balances as quickly as possible. Then, once your debts are paid off, remember to pay your credit card balance in full every month to avoid interest charges.
5. Track your expenses with a money management tool.
Do you know how much you’re spending on restaurants, concert tickets, that morning coffee? Paying attention to your spending habits is essential to building up your savings and staying on track to reach your financial goals.
Use a money management tool to automatically track expenses, categorize your monthly spending, and inform your decisions when setting and sticking to a spending budget. Better awareness of your spending will ultimately lead to better spending decisions.
6. Max out your employer’s matching bonus.
If your employer offers a matching contribution to your 401(k) or other retirement fund, make sure you make enough contributions to earn the full maximum contribution.
This matching amount is basically free money deposited straight into your retirement fund. Never say no to free money!
7. Prepare for the unexpected.
Emergency costs are inevitable. Whether it’s a car repair, an emergency room visit, or a last-minute flight to visit family, you’ll want to have an emergency fund in place to cover unexpected costs.
This fund will help you avoid piling up credit card debt, saving on interest and saving you from having to make tough choices that could end up costing you more money down the line.
Financial success comes when you have a plan and stick to it. Use these tips to create a savings and spending strategy that works for you, and focus on long-term growth as you build toward a better financial future.