6 steps that can change your financial future
Friday, 24 April 2020
If you've decided to get on better financial footing, even one small step can set you in the right direction.
In fact, you might be surprised at how one change of habit can lead to another. Before long, you can develop an entirely different way of handling your money and find your wealth growing.
Here are six steps that can change your financial future.
1. Set financial goals
Saving money can be more challenging if you don't know why you're forgoing luxuries, working overtime, or brown-bagging your lunch. Whether you're saving for a new house, digging out of debt, or trying to amass your first million by 35, it helps to remember your target.
The National Endowment for Financial Education program smartaboutmoney.org offers a LifeValues quiz to help understand what drives your financial decisions. They recommend setting short-, medium- and long-term goals, and provide a worksheet to help. "Try to set SMART goals. These are goals that are Specific, Measurable, Achievable, Relevant, and Trackable," says the organization.
The American Institute of CPAs also promotes a four-week fitness challenge that involves setting and working toward goals.
2. Boost your financial literacy
Figuring how to save, protect and invest your money may be overwhelming if you lack a basic understanding of personal finances. Fortunately, there's plenty of help at your fingertips.
There's also extension.org, a home-economics treasure trove that offers articles and webinars on financial planning, insurance, and investing small amounts. Money Management International provides a similar array of resources, as does the American Institute of CPAs. The Certified Financial Planner organization and others offer net-worth and investment-compounding calculators.
3. Organize important documents
Properly organizing all your financial records can help you avoid hours of searching when you need them. It also helps you realize what you do and do not have in terms of money, insurance and legal protection -- an important step in securing your financial future.
If you're overwhelmed by what to organize, extension.org outlines broad household filing-system categories, including bills, financial accounts, insurance documents, and other records like computer backups, passwords, and warranties. The USAA Educational Foundation has a comprehensive worksheet to help manage your files.
4. Make a budget
Develop a budget and stick to it. As the Dallas Fed notes, "[A] budget allows you to understand where your money goes, avoid overspending, find money for saving and investing to build your wealth."
The Federal Reserve suggests calculating monthly income and bills and tracking daily expenses, then boosting income and cutting costs if spending exceeds earnings. Smartaboutmoney offers simple steps for drawing up a spending plan, and American Financial Solutions offers an online budget tool.
Financial consultant Rick Kahler recommends setting aside certain percentages of income for investments, savings for short-term needs, and - unless your employer handles this - taxes. You have to pay bills and live on what's left, which may mean cutting costs.
5. Change one habit
Start small. Prepare a homemade meal one more day a week than you do now. This alone can save you hundreds of dollars a year, and once this becomes a habit, add another homemade meal to replace a takeout order. Keep adding, and soon you may have saved enough for a healthy emergency fund or a vacation.
Many financial experts recommend paying yourself first, meaning you should set aside a portion of each paycheck for savings. You can set up automatic payments to your retirement or savings account. Can't spare more than $5 for savings now? That's OK. Get in the habit, watch the pennies add up, and save more when you can.
If you're not doing so already, pay your bills on time. You'll avoid late fees and the higher interest rates that can result from overdue payments.
6. Become a savvier customer
Before you shop, search the Internet for coupons and discount promo codes, and compare prices from store to store. Use travel sites like Expedia.com and Hotels.com to compare hotel, car rental and airfare deals. Check your cable, phone and credit card bills for unnecessary or unauthorized charges. Ask your cable, Internet and phone companies for more budget-conscious plans.
These are just a few of the steps that can boost your financial well being.
The content provided is for informational purposes only. Neither BBVA USA, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial consultant about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA USA or any of its affiliates.
Links to third party sites are provided for your convenience and do not constitute an endorsement. BBVA USA does not provide, is not responsible for, and does not guarantee the products, services or overall content available at third party sites. These sites may not have the same privacy, security or accessibility standards.
You may also be interested in:
Savings & Budgeting
Q&A: A saving guide for millennials
Some analysts say millennials are enthusiastic about saving money, but aren't sure where to start. We asked a financial planning expert to help devise a few strategies.
Savings & Budgeting
5 Homemade Valentine's ideas
You can show your love on Valentine's Day without breaking the bank. In fact, homemade cards, foods and gifts can be a wonderful way to demonstrate your love and appreciation.