Financial Security

When you’re worried about money, either now or for your future, it makes it hard to relax and enjoy your life. The sooner you get ahold of your financial health, the sooner you’ll be able to live your best life.

You can live your best life financially if you take a four-pronged approach to the situation. First, you have to know where you stand financially. Next, pay off all debts and work on improving your credit score. And last, build your wealth and savings so that money is never an impediment to your happiness again.

Take Stock of Your Situation

It’s difficult to look at sometimes. We like to keep a blind eye to our finances because when you’re in debt, or not as cash-heavy as you want to be, it can make you feel uneasy.

But if you want your situation to improve, you have to know where your starting point is. Make a spreadsheet, or even use pen and paper if you need to, and write down all of your debts.

Try to organize them in order. You can do it in order from least to greatest amount owed, from highest to lowest interest rate, and so on. However you think you might want to pay them off, order them that way.

Write everything down, including:

·         Total amount owed

·         Minimum payment

·         Date due

·         Interest rate

Take stock of your monthly bills, too, including:

·         Mortgage or rent

·         Car payment

·         Electric

·         Water

·         Phone (landline and cell)

·         Insurance…etc.

Tally up your totals and your monthly minimums to see where you stand. It might be eye opening for you – a sign that you’ve been living far beyond your means. That’s not a bad ting to discover, as long as you take steps to curb your spending habits now.

Pay Off Debt

To live a life with financial peace of mind, you need to be in debt to no one. Owing lenders is a bad feeling, and it just takes one personal catastrophe to bring creditor to your doorstep hounding you for payment relentlessly.

Make a plan to become debt-free as soon as possible. You want to choose how you off your debt according to the motivational or money savvy methods. Either way is okay, as long as it spurs you into taking action.

The money savvy method means you pay off high interest rate cards first – so that you’re not racking up a lot of needless interest payments that cause you to take longer to get out of debt.

You’ll look at the card or loan that has the highest interest rate and begin knocking it out first. When that bill is paid, apply whatever minimum monthly payment you were putting toward that card to the next one in your crosshairs, and so on.

The motivational method is one where you keep your spirits high as you face this mountain of debt. You’ll be paying off your debt from smallest to greatest amount owed.

This means you knock out cards faster, giving you a sense of pride and helping you see that your efforts are working. You knock out a small card and then apply that minimum payment to the next card on your list.

Don’t save up until you have a full amount to send off. Every time you have a little bit left over in your budget – even $5-10, send it in toward the payoff. You’ll save on interest and also resist the temptation to spend it on other things if the urge arises.

Improve Your Credit

Part of improving your credit will occur as you begin paying off your debt. You want to find out where you stand, so run your credit report from all three credit bureaus (you can get one free one each year) – and also find out what your score is.

You ideally want to have a good or higher rating. You don’t want average or high credit risk. You might not be applying for new credit cards once you make the decision to build wealth, but you may someday need to get credit for a big-ticket item like a mortgage or car loan.

Your credit report will tell you what you’re doing right and what you’re doing wrong with your credit. For example, if you’ve missed a few payments, that will put a ding in your score.

If your cards are all maxed out, that can hurt it, too. The more room you have on your cards, the better your score will be, so try to keep balances low – pay them off in full whenever possible.

Don’t close out credit cards you’re not using. One thing that contributes to a healthy score is longevity with your lenders, so the longer you’ve owned a card and been responsible with it, the better it will serve your credit score.

Build Wealth

Wealth building means different things to different people. But one thing everyone can agree on is that it means never owing anyone again, and having the funds to live your best life – by doing the things you feel are important.

First, you need to come up with an emergency savings. This is the equivalent to several months’ worth of earnings. You want to have enough cash on hand to sustain you through a medical emergency or job loss.

Next, you need to plan for retirement. You want to have enough to retire at an age when you want to – not having to work for years past your ideal retirement age.

What do you want to do in your retirement? Do you want to buy a second home at the lake or travel around the world? Make financial plans to sustain you through those goals.

You might find that your current career can’t support this kind of savings. So that may mean getting a second stream of income for your household in the form of a second job or the launch of your own online business as an Internet entrepreneur.