What does a financial planner or wealth manager do? We do lots of things; however, if we had to answer succinctly we would say that we help people achieve their financial goals. So, what does that mean? Often it boils down to achieving financial independence which affords you (as the financially independent person) to make more choices on how you want to live your life. Not everyone has the same dreams, but most people want to be able to make good choices and being on solid ground with your money often helps this cause significantly. So, read on for some ways that you can increase your financial independence.
Way #1: Make a Budget and Stick to It
If you want to be certain that your bills will be paid and your savings goals are on track, then you may want to set a monthly budget and do your best to stick to it. If you’re used to spending and saving as you please, sticking to a strict budget will feel hard at first. But over time, consistency with your spending habits will make following a budget easy and natural. Holding yourself accountable can help deter impulse buys and make your savings goals a bigger priority. NOTE: not everyone needs a monthly budget, but what everyone should know is how much they are spending and what it is they are spending their money on.
Way #2: Use Your Credit Cards, But Pay Them Off Immediately
Credit cards have high-interest rates that can grow your debt every month they aren’t paid off. If you’re able, pay off your credit card balance in full each month. Additionally, pay them on time to help you build good credit. If possible, it’s best to treat your credit card like a debit card, meaning you don’t spend more than you have. Once you have high-interest debt like this paid down, you can focus on low-interest debts like mortgages, auto loans and student debt.
Way #3: Opt for Automatic Savings / Investing
One of the most effective ways to save more money is to automate the process. Determine how much you’re able to contribute to your savings account each month and set up an automatic transfer with your bank. Better still, many of our most successful clients take money from their checking and savings and push it into investments each month. REMEMBER: excess cash sitting in a bank account is not an investment (inflation actually makes your cash worth less everyday), so putting that money to work is critical!
If your company offers a retirement savings plan, you may have the option to automatically defer funds from your paycheck to a 401k, 403b, or 457 account. Again, this is something that will happen without action from you, making it an easy and convenient way to build retirement savings.
Way #4: Look For Opportunities to Increase Your Income
Increasing your income is easier said than done, but it’s not impossible. If you’ve been at your job for a while and taken on added responsibilities, now may be an opportune time to speak to your boss about a pay adjustment. Or, searching for opportunities elsewhere could result in a bump in salary.
If you have a hobby you’re passionate about, look for opportunities to make some money with it. Put your art up for sale online, offer classes (cooking, dancing, gardening, etc.) through your local rec center or find odd jobs you can do on the weekend.
If you do find yourself able to increase your income, be sure to revisit your budget and determine how that additional money should be used. If it’s being spent frivolously, it’s not helping you work toward greater independence.
Way #5: Begin Building Your Portfolio
Once you have control over your debt, you’ll want to focus on building passive income - which can be done through investments. Start off simply by contributing to a retirement account like an IRA or Roth IRA. Even small contributions can now grow significantly toward retirement through the power of compound interest.
Certified Financial Planners™ (like Jimmy and Jeremy at OnTrack Wealth Management) can help you establish a financial plan and build a tailored, complex investment strategy that meets your personal goals.
Achieving financial independence isn’t something that happens overnight. If you plan and save, however, it really can pay off for you in the long run. Not only does it help you to build savings, but it starts strong habits for the future.