How To Level Up Financially: 6 Steps To Go From Getting By to Getting Ahead
Economic uncertainty and high costs are seemingly everywhere you look. Right now, you might even be at a point where you’re just getting by each month.
The good news is there’s a lot you can do to improve your situation. Follow these steps if you’re ready to switch from getting by to getting ahead.
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Make a Plan
If you want to stop “getting by” and start “getting ahead,” Alex Duffy, independent agent at Goldfinch Financial Group, said you need a plan.
Take a moment to figure out where you’re at and where you want to be in life (and financially). Do you have a lot of debt that needs paying off? Are you trying to save up for retirement or a house? You might be able to plan on your own, but don’t be afraid to ask for help.
“Consult with trusted professionals if necessary, and do so immediately,” said Duffy.
Get To Know Your Money
If you don’t know where your money’s going every month, you’ll have a much harder time getting a handle on it. That’s why Cody Schuiteboer, president and CEO of Best Interest Financial, suggested getting to know your money.
“Most people live their life ‘getting by’ without having any idea where their money is going,” he said. “You cannot optimize your money flow if you do not know what happens to it.”
Track every expense for the next two weeks. Don’t try to cut back (yet). Just record what you’re spending. You might find yourself losing hundreds of dollars on things you don’t really need.
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Live Below Your Means
It’s easy to spend more than you make, especially when you’ve got credit cards. It’s also easy to start spending more as you earn more.
But Duffy suggested living on less than what you earn. Look at your expenses and find ways to cut back on things like subscriptions or meal delivery services. This will free up some extra cash in case of emergency -- or if your income takes a hit.
Save First, Then Spend
When you have money available to you, the temptation to spend it is very real. But if you’re struggling just to get by, you might be better off prioritizing saving over spending.
“You spend as much as you have in your personal account,” said Schuiteboer. “If you have $3,000 a month, you spend it.”
To stop doing this, set an automatic monthly savings goal based on your current income and expenses. If you can save 10% of your gross salary, that’s great. Saving more is better, but even if you can only set aside a smaller percentage, it’s still one step toward getting ahead.
Duffy suggested setting up automatic payments to more than just your savings account. Do this for things like your 401(k), Roth individual retirement account (IRA) and 529 plan, too.
Start Tackling Your Credit Cards
As per Experian, the average credit card balance is $6,735. Balances this high can be difficult to pay off, especially with high annual percentage rates (APRs). But if you want to get ahead financially, you can do it. It just takes some time and a concerted effort.
Schuiteboer suggested setting a deadline for when you want to have a specific card paid off. From there, focus on paying off one debt at a time. As each balance reaches zero, you can put more toward the remaining cards until you’ve gone debt-free. At that point, start saving or investing that money in the future.
Don’t Let Lifestyle Inflation Get You
Lifestyle inflation is when you start earning more, and so you start spending more. It can also happen when you find yourself with more money leftover each month -- maybe because you’ve paid off a loan or credit card.
Don’t let lifestyle inflation win. Earning more money is exciting, but when you increase your spending proportionate to those earnings, you lose out on what could’ve been an opportunity to build financial security.
“People pay their debts, and then they go back to the previous lifestyle and raise their living standard,” said Schuiteboer. “If you eliminate your $340 car payment, you [shouldn't use the] extra money for vacations -- use [it] for saving and investing instead.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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