[July 2020 | By Jim Elder, Finance Editor]
Every July 4[could use “Fourth of July” here], we have the opportunity to celebrate the birth of our nation and our independence. We show appreciation for our freedom with family, friends, barbeques, and fireworks.
Sadly, while we enjoy our freedom as a nation, many Americans are not able to enjoy their own financial freedom. They are living paycheck to paycheck with almost no money in savings and a lot of debt. Their stress level is elevated, which negatively affects many areas of their life.
To get your finances on track, follow these simple steps to achieve financial freedom.
1. Create a Budget
It’s time to get serious. Sit down with your spouse and make a monthly budget based on your income, not your expenses. You will no longer spend more money than you make.
2. Create an Emergency Savings Account
A general rule of thumb is to have six months of your expenses in a savings account for emergencies. The recent virus crisis has demonstrated the need to have cash available for emergencies.
3. Pay Down Your Debt
Having debt can hold you back financially. Create a plan to remove your debt. A simple method is a “snowball” program. The way it works is: List all of your debt from the smallest to the largest, then focus on paying off the smallest debt first. When that’s paid off, take the extra money and pay off the next smallest debt, and so on.
4. Increase Your Retirement Savings
Make sure you are contributing to your retirement plan at work. Try to increase the amount each year until you are contributing 15 percent of your income. If you don’t have a retirement plan through your employer or have additional funds, you should consider adding money to a Roth IRA as well.
5. Get Your Money to Work for You
While you are focused on saving, don’t forget to work on increasing your rate of return. Increasing your investment growth can help you growmake tens of thousands of dollars.
6. Get Professional Help
If any of this feels daunting, then it’s time to seek financial guidance. Avoid using a commissioned salesperson. Instead, hire a fee-only fiduciary financial advisor who can give you unbiased advice. They can help lay out a plan to get you on the right track.