Getting ahead financially may not be the easy road, but it’s a road you can take right now. Start putting one foot in front of the other today on the road to financial independence. This blog offers three steps you can take to set yourself in the right direction.
Increase your financial literacy. Start by obtaining a free copy of your credit report at annualcreditreport.com. Look at your payment history and get an idea of where you stand with potential creditors. You may also consider getting prequalified for a mortgage loan. An experienced loan officer can answer many of the questions you have about your creditworthiness.
Next. switch out your daily reading, podcast, and screen time for financial education. Read The Richest Man in Babylon by George S. Clason and The Millionaire Next Door by Thomas J. Stanley and William D. Danko. Subscribe to podcasts that will increase your financial savvy. Two useful podcasts to build your financial muscle are The Motley Fool and The Dave Ramsey Show.
Decide on the experts you want to work with and make contact with those people. In addition to a loan officer, your financial team should include a CPA and a financial advisor. (Financial advisors are sometimes provided by your employer if they offer a retirement account.) Ask friends and family for referrals and place a call to the CPA and financial advisor you want to work with. Let them know that you’re interested in building wealth and that you plan to increase your investment commitment while decreasing your tax liability this year. Ask if they have any tips for someone just getting started.
Employ the 80-10-10 method of financial planning. With this method, you will live on 80% of your income. Ten percent is invested and 10% goes to charity. It works.
Open an Individual Retirement Account (IRA) or use the one you have. If your employer offers an IRA, put at least 3% of your income into it. (This still leaves you with 7% of your income to invest somewhere else.) If your employer does not offer an IRA, or if you are self-employed, ask your financial advisor how to open a retirement account. Then, consult with your CPA regarding how much to put in each year.
Consider a side hustle. If you have spare time you are at risk of wasting it. You are also at risk of spending money due to boredom! Consider creating an additional source of income during your downtime. The Porch offers some tips on choosing a side hustle in today’s marketplace.
If you are new to the world of wealth-building, then your biggest asset is your ability to earn income. Keep and invest as much of each paycheck as you can. This may mean that you have to settle for staycations and home-cooking for the time being. Hang in there. Today’s sacrifice is tomorrow’s reward.
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