You know what they say: “A penny saved is a penny earned.” It’s the same with financial planning. In fact, it’s even better. A dollar saved is a dollar earned—and that’s just one of the many benefits of setting up a financial plan. But where do you start? If you’re overwhelmed by all the information out there and don’t know where to begin your journey toward financial freedom, don’t worry! We’ve got your back with these five hacks for getting started on a budget (or improving one), consolidating debt, starting an emergency fund, opening savings accounts and tracking your progress along the way explains Vincent Camarda.
1. Create a budget.
A budget is the most basic, yet most effective financial planning tool there is. It’s basically just a way to keep track of your money so that you can figure out where it’s going and adjust accordingly. Creating a budget will help you save more money, pay off debt faster, and feel more in control of your finances overall.
2. Make a list of your expenses.
- Make a list of your expenses. This might be easier said than done, but you can’t make smart financial decisions without knowing where money is going. You will need to find out what your income is, then go through the process of making a list of all the things you spend it on by category (for example: paying off loans, clothing, food and entertainment.
3. Consolidate your debt (if possible).
Consolidating your debt is a good idea if you have multiple loans with different interest rates. You can consolidate debt by taking out a personal loan, or you can consolidate it by taking out a home equity line of credit (HELOC). Both of these options will combine all of your existing debts into one monthly payment and this will help you to stop paying interest on multiple accounts.
- Your monthly payments can increase significantly after consolidation
- The rate at which you pay off the balance will be lower than what was previously being paid towards each individual account
4. Open a savings account.
A savings account is an investment account that works to protect your money and make it grow over time. Opening a savings account can help you manage your finances by giving you a place to put excess cash. A good rule of thumb is to have at least enough money in the bank so that if you lost your job tomorrow, you’d be able to survive for three months without income—in case of emergency.
In order to open a savings account, start by speaking with a financial planner about the best method for doing so (budgeting, investing). Then contact a local bank or credit union and request information on opening an interest-bearing checking or savings account.
5. Track your progress.
Tracking your progress is an important factor in staying motivated. You can track your progress on a regular basis, such as once per week or once per month. A good tool for this might be Mint.com, which allows you to track all of your finances in one place and gives a better understanding of where you stand with saving money and making smart financial decisions over time.
Financial planning is easier than you think
If you’ve ever sat down with a financial advisor and felt overwhelmed by your lack of knowledge, it can be hard to think about taking on the task yourself. But in reality, financial planning is not that complicated. In fact, there are plenty of free resources online that will help guide you through the process.
We hope these tips have helped you to get started on your financial planning journey. All it takes is a little bit of dedication, some hard work and patience. If we can do it, so can you!