Jan 01, 2017
Is achieving financial independence a goal for 2017? Here are five suggestions that can help.
Review your expenses. Get ready for the new year by taking inventory of your finances. Set up a free app, a spreadsheet, or a pencil-and-paper notebook, and start tracking your expenses. You may be surprised at the result. Getting a handle on how cash actually flows through your bank account can be a great motivator.
Build an emergency fund. Are you currently financing your "rainy days" with expensive credit card debt? Use your expense review to determine where you can save cash to set aside in an easy-to-access emergency fund. Ask your employer if you can allocate paycheck deposits into more than one bank account. Then pick an account, designate it as your emergency fund, and start socking money away. Strive to accumulate a balance that will cover three to six months of living expenses.
Save automatically. Have your retirement savings deposited directly into your retirement account. If your employer offers to "match" contributions to a 401(k) plan, be sure to take full advantage. Matching amounts are dollars your employer will put in your account to "match" a certain amount of the money you contribute. The "match" is not taxable to you until you withdraw the money.
Pay down debts. Do not be naïve about the cost of credit. Pay off high-interest cards first, and consider consolidating your debt onto one low interest rate card. Alternatively, you could choose the card with the lowest balance to pay off first so that you will get a quick sense of accomplishment and be inspired to continue. By whittling away your debt, you will cut your overall interest costs and enjoy more financial flexibility in the future.
Treat yourself. To stay motivated, budget "fun money" into the mix. Reward yourself with the occasional expense that brings joy, such as a meal at a nice restaurant or a weekend get-away. Another morale booster: Coming up with creative ways to save money by switching to less expensive versions of indulgences, such as home-brewed specialty coffee instead of buying the prepared version at a coffee house.
Financial independence does not mean financial sacrifice or painful deprivation. Instead, the idea is to make your money work for you, so you can have more time to live your life as you choose.