Having no savings or investment can be likened to going into a battleground without any protective shield. You might be very good with your sword but at the same time, you’re very susceptible to being hurt by an opponent. Simply put, you could have a regular income and live a happy life but your lifestyle could take a turn for the worse if you’re hit by an unexpected financial obligation.
If you do not have any savings, now is not the time to beat yourself up, it is time to retrace your steps and get on the right track. Keep reading and you’ll find out exactly how to go about it.
- Lay Your Finances Out On The Table: The first step to solving your financial problem is self-awareness. You need to understand where you are in order to determine where you’re going. Lay all your cards on the table – your sources of income, debts, assets, liabilities, and everything that is related to your finances. This will help you identify your financial strengths and weaknesses.
- Adjust Your Lifestyle: When your finances are clearly laid out on the table, you can then see what areas of your life you need to adjust in order to cut down on your expenses. You may need to sell that extra car or cut down on the number of times you eat out. If you find yourself constantly buying clothes and shoes, you may need to unfollow your favorite online stores.
- Start Budgeting: The next thing to do is create a budget. A budget is the best way to keep your finances on track. When done properly, a budget also helps you assign a fixed portion of income to your savings. Learn simple ways to create a budget here.
- Start An Emergency fund: An Emergency fund is the first type of savings that you should have. Your emergency fund should be at least 5 times your monthly income. This ensures that you are ready for any financial emergencies if or when they arise.
- Pay Off Your Debts: Debts are like heavy shackles tied to your feet, it drastically slows down your movement towards financial freedom. If you have debts, your budget should make provision for repayment. You can either decide to pay off the smaller debts first or pay off the debts with the highest interest first. Learn more about effective debt payment here.
- Start Saving On Autopilot: As soon as you’re debt-free, it’s time to start saving towards your financial goals. I’ll strongly recommend a periodic automatic debit into your savings account. This helps you eliminate the temptation not to save considering the fact that you found it difficult to save in the first place. A pace plan on Crowdyvest is perfect for you.