3 Steps to Financial Freedom

July 16, 2024

Step 1. Spend Less Than You Earn.

According to the Huffington Post, about half of Americans spend more than they earn. Some of this can be attributed to the economy and a less than livable minimum wage – but not nearly as much as you would think. Instead, much of it is due to inadvertent overspending and lifestyles that forgo saving and budgeting in favor of more immediate gratification. To work towards avoiding overspending, you can:

  • Breakdown Your Paycheck – Many don’t understand how much they have to spend out of what they make. Not knowing this leads to overspending. After accounting for mandatory yearly expenses like taxes, living expenses, mortgage/rent payments, loan payments, etc., how much of the remaining income is ‘spendable’? To secure financial freedom, you have to try and make sure you don’t exceed that number.
  • Not Buy What You Can’t Afford – To be sure you don’t spend your paycheck on items you don’t need, ask yourself if you will need that money for anything else in the future, and if you have the cash to purchase it. A good strategy to help with this is to create a list of items you need/want to purchase in order of importance and when you get the spendable income, work through the list and making sure to not spend beyond the cash you have which can create debt.

Step 2. Save Now, Spend Later.

‘Spend now, pay later’ schemes will usually leave you paying well above and beyond the value of your purchase. Instead of falling victim to this and other debt-increasing lifestyle patterns, try a new concept on for size – save now, spend later.

To assist with this, you can create an active savings plan or a budget. A savings plan can account for emergencies, short and long term items such as retirement, children’s educations, etc. A budget will help you track and manage how you are using your money and that it is being used in ways to best benefit yourself and family.

Step 3. Understand Debt.

Ever since debt was introduced, there has been good debt and bad debt. However, a lot of accumulated debt today is comprised of ‘unnecessary’ or ‘bad debt’ instead of good.

Take a look at your monthly expenses and figure out where you can cut to start paying existing debt down. Do your best to not fall victim to crafty advertising tactics which incur more debt. And lastly, make your overall goal to become debt free. Having this goal committed to your mind will help you eliminate your current debts and help you to avoid taking on unnecessary debts, and you can become debt free a lot faster than you initially thought was possible.

One Final Tip: Payday Loans Never Pay Off

There comes a time in most people’s lives where finances get behind/tight. This makes payday lending the perfect solution for the one in need of cash. However, new data suggests that this is about the worst solution families can employ, as it often puts families into debt they can’t get out of, also known as the ‘revolving door of debt.’

According to CNNMoney, more than 80% of all payday loans are rolled over or renewed within two weeks, and most of their consumers end up paying significantly more in interest and fees than the loan is worth. In fact, the interest rates of many payday loans are often close to an astounding 400% APR.

Posted by Parker Eads in Uncategorized.

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