In past decades, it was easier for many people to save, invest and plan for financial security into their golden years. In other words, they had a more stable financial future.
People stayed at one job for many years and often for their entire career.
How to plan for a debt-free financial future
They invested fully into employer-sponsored retirement plans, bought a home and paid it off in full and emerged debt-free and with savings intact.
The younger generations haven’t had things so easy.
If current projections hold, the newest generation to enter the workforce, the Millennials, will hold anywhere from 8 to 15 jobs before they reach retirement age.
While job hopping offers great skills-building, it isn’t so great for saving money.
In this post, you will learn how to avoid the credit/debt trap and plan for a sound financial future.
1. Cut the credit
The moment you entered college, you likely began to receive a steady stream of offers from credit card companies.
They may have even met you halfway, showing up on campus replete with free swag in exchange for that credit card application.
Unfortunately, carrying credit cards can quickly lead to a credit card debt, and it isn’t nearly so easy to pay off what you owe than it was to spend through your line of credit.
The first step towards building a sound financial future is to cut out using credit cards.
You can use a debit card or a secured credit card if you don’t want to carry cash, but the credit cards are just too tempting, so leave them at home.
2. Make paying off long-term debt a priority
Long-term debt can be easy to forget about. After all, it is long-term. Examples here include auto loans, student debt and (when you get to that point) a mortgage.
But in many cases, there is no penalty for paying off this type of debt early. And once it is gone, it is gone, leaving extra funds that can be saved and invested instead.
At the same time, if you have credit card debt, don’t neglect these payments. If you are struggling to make the minimums, don’t be afraid to call your credit card company and ask for a lower interest rate.
If you need help with this, reaching out to credit repair companies can give you the benefit of financial experts who know how to negotiate successfully to pay down debt.
3. Set up an emergency fund
Financial expert Dave Ramsey gets a lot of the credit for promoting the need to create a “rainy day” or emergency fund, a smart move that can keep you from digging yourself back into debt if an emergency strikes.
Ramsey believes so strongly in the need to create this highly liquid emergency fund that he even offers steps to jumpstart the fund’s progress:
- Sell something and save the proceeds
- Pick up one-time or seasonal odd jobs
- Consider a weekend or night-time second job
- Cut back your spending
With $1,000 saved, you can begin to save towards Ramsey’s ultimate goal of six months’ worth of basic expenses.
4. Reduce your expenses and build a budget
Perhaps the most challenging part of building a debt-free financial future is simply curtailing present-day spending.
Yes, the future is out there, and yes it is coming. But it is not nearly so tangible as that-thing-you-want sitting right there in the store window!
An easier way to tackle saving is to cut your monthly expenses and save the difference.
For example, you can carve out a few hours to gather car insurance quotes and switch to a new insurer that offers better rates and more discounts. Then you can pop the saved funds into your emergency fund!
Planning for a debt-free, sound financial future takes just that – planning. So for now just know that your future self will thank you for taking the time to pay off debt, save and invest.
Your future self will thank you for taking the time to pay off debt, save and invest.
Do you find those tips useful? Or maybe you think we have missed something important? Let me know by sharing your thoughts in the comments below.