Young adults have big plans and dreams for their money. Eight in 10 plan to own their own home, while three-quarters want to become financially independent, according to recent marketing research. If you’re one of them, do you have a plan to get there?
Taking control of your finances now will help you get on the right path to your ultimate goal of financial freedom. In honor of financial planning month, here are the steps to get there. Implement these one by one, and you will be on your way.
Step 1: Create a household budget
One of the best things you can do for your long-term financial freedom is learning to live on less than your take-home pay. It all begins with a monthly plan. Make a list of your recurring expenses: housing, phone, garbage, insurance and so on. Then, think like a detective and search your bank statements for opportunities to reduce the amounts from your monthly budget. Canceling little-used subscriptions and streaming services are two easy ways to keep more cash. A willingness to pick up the phone and ask your internet or cable provider to give you the same low promotional rate they give to new customers can also add dollars to your bottom line.
Step 2: Be a saver
Now that you’ve created space in your budget, start funneling those extra bucks into savings so if an emergency comes up, you’re prepared (and not increasing your credit card debt). The ideal is to save up three to six months’ worth of your monthly expenses, so if something like a long illness or prolonged unemployment comes along, you can cope with it. To start, setting a smaller goal is fine. You can automate your savings to make it effortless.
Step 3: Make a financial plan
Once you have some cash socked away — perhaps enough to cover a month or two of expenses — it’s time to divert some of that savings stream into long-term investments. If you’re not saving for retirement yet, start today, even if it’s only $50 a month. Then, start thinking of the milestones ahead of you and what you hope to accomplish by certain dates. Sketching it out now can help you start thinking of the future in a bigger way.
Step 4: Pay down your debts
To knock out your debts, the first step is knowing exactly how much you need to eliminate. Though it can be painful to see all the balances in one place, make a spreadsheet showing the details of each account. (Trust us: As debts shrink and turn into zeros, that initial terror will give way to pure joy.) Next, choose an account to pay off early, preferably the one with the highest interest rate. Once you’ve paid off this first account, you can apply the payment to the next debt. Keep going, and do what you can to avoid additional consumer debt, and you’ll eventually be debt free.
Ready to get started? We can help, even if you can only start small. With automatic savings at Minnwest Bank, you can transfer as little as $25 a month. With no minimum balances and no monthly service charges nibbling at your progress, all you have to do is set up your monthly transfer and watch your money grow. Just a simple and easy way to help you reach your goals. Contact us today.