Building a strong financial future is a goal many of us share; it’s crucial for achieving long-term financial security and stability.
Saving money during economic uncertainty can seem daunting however, it’s an important fear to overcome as it can provide a safety net in case of financial emergencies and reduce stress.
Building your financial future involves knowing your spending habits, setting meaningful financial goals, identifying ways to reduce costs, and creating a solid plan to invest and grow your money.
Knowing where to start can feel overwhelming, but with the right guidance and mindset, it is achievable.
Here are six essential steps to help you build your financial future:
1. Determine your baseline costs
This means taking a hard look at your income and expenses, and recognising where you can cut back.
By developing an honest baseline cost summary, you can see where your money is going and identify areas where you can reduce your expenses.
This can be a powerful wake-up call. Taking the time to better understand your outgoings puts you in the driver’s seat of your financial future.
Acknowledging your spending behaviours and understanding the consequences of every dollar spent can help free up income you can invest in your financial future.
2. Set meaningful goals
Once you have a clear understanding of your baseline costs, you can start thinking about your goals.
By setting specific, measurable, achievable, relevant, and time-bound (SMART) goals, you can direct your energy and time towards making your financial dreams a reality. For example, your goal could be to reduce your reliance on your highly stressful executive role.
Setting meaningful goals keeps you motivated, and if you set SMART goals, you can track your progress and increase your chances of reaching financial freedom.
3. Find ways to reduce costs and create savings
This step involves reigning in some lifestyle costs such as credit card debt or leasing a car.
There are many cost-reducing tips you can immediately act on. For example, eat in more and out less, cancel unused subscriptions, and for the spend-thrifty, leaving your credit card at home when you go out.
As for creating savings, make it a habit to save a percentage of your income by setting up an automatic transfer into a savings account.
Another advantage of being clear on your baseline costs is committing the rest of your income to your savings.
4. Enable your personal finance village
This means getting help to identify where you have surplus cash or income and planning to capture it before it gets spent.
Having a trusted advisor can be critical, especially if you are starting afresh and being accountable to a financial professional will help you stay on track.
By working with a small number of trusted people who support and encourage you to meet your goals, you can plan and execute a strategy towards greater financial freedom and wellbeing.
Stop Worrying About Money by Jacqui Clarke.
5. Design your dream life
By considering your vision for the future and reflecting on what you want your life to look like in five to 10 years, you can scrutinise every cost and income source against this vision.
For example, if your dream is to leave your high salary job (or just get off the treadmill), you will need to consider the period over which to adjust or lower your baseline costs to accommodate this change.
6. Invest to secure your financial freedom
Saving and investing is critical to building a strong financial future.
Over time, the decisions you make about how to invest your money will add up and help you achieve your goals.
Consider both passive and active investment strategies. These may include savings (using term deposits and high-interest savings accounts), comparing renting versus buying, investment properties, buying or building a business, buying shares and cryptocurrency.
The journey towards financial freedom is not a sprint
Building a financial future takes time, effort and discipline, but if you commit to and focus on your goals, you can take control of your finances, create a more secure future and know that in times of hardship you can worry less.
Remember, the journey towards financial freedom is not a sprint; it’s a marathon.
By taking consistent and deliberate actions, you can make steady progress towards building the financial future you deserve.
