This post is by our regular contributor, Kristi.
Do you feel like you’re struggling with your daily finances? If you are living paycheck to paycheck, burdened by debt, or just feeling stuck in a rut and not making any strides towards your financial goals, then you’ll want to shake things up a bit and reassess your personal approach to your financial management.
If you want to improve your long term financial situation, use these seven practical ways to stay on a path towards an improved financial future.
1) Live within your means
The first step to improving your long term finances is to improve your daily finances. It seems pretty basic, but if you want to reach your bigger financial goals, you need to learn to live within or below your means in your daily life. If you are living paycheck to paycheck and relying on credit to make ends meet, you’re not going to be able to build a prosperous future for yourself.
2) Cut your expenses
Find ways to stop living paycheck to paycheck so that you don’t live in denial of your financial situation. There is always a way to spend less than you earn. If you don’t have money left over after the basics of food, housing, and bills, you won’t be able to focus on saving and investing to improve your finances in the long run.
Consider experimenting with ways to lower your expenses. Make some lifestyle changes by dropping costly habits or getting rid of services that may not be a priority right now. For example, lower your internet usage plan, stop paying for cable, or stop eating out as often. Simple changes can save you hundreds of dollars every month.
3) Increase your income
If you are already at a bare bones budget, and still struggling to make ends meet, try to think of creative ways to increase your income. If your current paycheck isn’t cutting it, then you need find a way to make time for a side hustle. What is your passion? Try to visualize a way to monetize your skills along with your passion, to create a side job that you will actually look forward to working. Read our Ultimate Guide to Side Hustling to get started.
If you enjoy what you’re doing, you will be able to put so much more time and effort into making it a successful side hustle, without getting burnt out. It may be a struggle at first, but by reassessing priorities and analyzing your schedule, you will be able to improve your financial circumstances, pay the bills, live comfortably, and start saving for your future.
4) Get rid of debt
The most essential step to improving your long term finances is to get rid of any debt. Pay off your school loans as quickly as possible, get out from under any credit card debt you may have, and pay off any personal or vehicle loans.
Once you have successfully slashed costs from your daily living expenses and start bringing in more income with a side hustle, use the difference to pay off your debts. Once you are no longer in debt to any institution, bank, or individual, you will truly be free to start making your money work for you. Do everything you possible can to chip away at that debt.
5) Invest and save
Once you reach the point where you are able to live within your means, and you have money left over every month, start investing that money into a stocks which will provide passive income in the future. Investing in dividend stocks is a great way to improve your long term finances. Invest in both stocks and bonds to create a diversified portfolio which matches your risk comfort level.
6) Max out your retirement accounts
Especially if you’re struggling with living paycheck to paycheck, it can be tremendously difficult to look past the here and now. Maxing out your retirement accounts is essential to improving your long term finances though. Don’t be one of the 36% of Americans who have nothing saved for retirement.
Even if it’s just one percent, try to save at least something for retirement with each paycheck. As you become more financially secure, incrementally increase that percentage each month or year, until you reach the point where you max out your retirement accounts every year.
7) Improve your financial literacy
By striving to first understand the basics then the more complicated financial topics, you will set yourself up for success. If you feel like you don’t know enough about the basics of financial literacy or even if you want to increase your knowledge base, look to the experts to help you learn more about the subjects you aren’t very comfortable with or have room to improve on.
Take a class on the basics of investing purchase inexpensive financial books on Amazon to learn more about real estate, the stock market, or retirement accounts. There are so many resources out there that can help you become as financially savvy as possible and learn new ways to improve your long term finances.
Visualize your financial goals
Remember the old adage of “look before you leap.” How will you ever reach your financial goals if you haven’t even decided on any goals?
Set a course for yourself with the actionable steps that you can take on your way to improving your long term finances. Pay off debt, live within your means, and save as much as possible.
What steps are you taking to improve your long term finances? Do you have a long term plan for you financial future?
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I think my favorite out of all of these is increase your income! :)
What a great list! The only thing I would add is step zero: Decide that taking charge of your finances matters!
These are all great tips! For someone like me who is just starting to understand the importance of financial freedom and focusing more on my long term financial goals, they are also very overwhelming! I often feel like I should be tackling more goals that lead to financial freedom at once!
All great tips. My favorite is #7 because when people increase their financial literacy and comfort with managing their money, they are more apt to take care of 1-6.
BudgetBlonde Haha! Mine as well! Everyone loves more money =]
Hannah UnplannedFinance Great point, Hannah! Deciding to take charge of your finances really is the first step!
LovetteMacc Don’t feel overwhelmed! By even knowing that your financial situation matters, and visiting websites like this one, you are so far ahead on reaching your financial freedom goals!
ShannonRyan I agree! And you are never done learning! There is always something else that you could learn about and put into practice to better your situation.
This is a helpful list and I think the order makes a lot of sense. I would add that having a purpose for each dollar saved is important. For me, since retirement is so far off its hard to enjoy saving for it. Therefore, I get more specific with what my retirement saving will provide for me. This could be something like, a trip for the grandkids to the Grand Canyon, or a house with a pool. Like you mentioned, visualizing your goals helps a ton. Also, automating savings helps. A percentage from each paycheck goes to retirement and a separate investmenting account. This way I don’t have to think about it as much.
I agree wholeheartedly with all of these and the one that I’d add is create an accountability partner or coach to keep you on track when you blow out your budget for a couple of months and lose the motivation! :)
mycareercrusade Great suggestion, Jef! Accountability is key, and definitely not easy with something as personal as finance.
DC @ Young Adult Money mycareercrusade Cheers DC! Good to see the site ticking along nicely as well, another thing I need accountability on is finally getting a new site up & running, having too much fun in life haha ;)!
mycareercrusade DC @ Young Adult Money Haha a website is a ton of work (as you know!) so I don’t blame you if you put it off. No rush!
DC @ Young Adult Money mycareercrusade It’s funny when starting a website/business you wonder what comes first the customers or the website haha.. I’m doing some 1 on 1 coaching in financial education at the moment however it’s all about the scalability and making the biggest impact which is driving me to want to have get the blog/site up! :)