Would you like to be financially independent? The goal is rather elusive for many people, no matter how hard they work. One thing that can help move you along the path more quickly is a structured plan. The good news is that many people have already used and had success in achieving financial freedom. It’s not easy because every one of the steps calls for self-discipline, planning, perseverance, and constant watchfulness when it comes to spending, saving, and earning money.
But the rewards are significant and show up sooner than you think. Depending on how dedicated you are to the plan, how much you earn, and how adept you are at trimming your budget, it’s entirely possible to see solid results in fewer than six months. The backbone of the technique is controlling your spending. Other key parts of the strategy include saving, investing, making a realistic budget, avoiding the use of cosigners on loans, and watching your credit cards like a hawk. Here’s more detail about each piece of the four-part plan for getting your money situation in good order.
If you can sign up for a payroll savings plan or make your own arrangements to put money aside every payday, you’ll be miles ahead of the pack. Establishing a savings habit is one of the most powerful things you can do for your financial health.
At first, don’t worry about the amount you set aside. Even a few dollars from each paycheck is enough. The goal is to get into the habit of living on less than your full income. Eventually, aim to save between 5 and 10 percent of what you earn.
Don’t Use Cosigners on Student Loans
When you apply for student loans, don’t use a cosigner. This might sound counter-intuitive, but it makes good sense and will help you a lot in the long-run. Here’s why. By applying all by yourself, you’ll have the potential to boost your credit score once you begin repaying the loan. Everything will be in your name alone, thus all the benefits will accrue to you, not to someone else.
Plus, what many people fail to realize is that when you use a cosigner, you’re essentially stuck with whatever interest rate that person qualifies for. So, if your cosigner has less than ideal credit, you could end up with unfavorable terms for quite a few years after you graduate.
Private student loans often require no cosigner anyway because lenders typically look at your employment status, income level, job history, and the reason you’re borrowing the money. Education is generally considered a quite worthy reason to seek private financing. The bottom line is don’t have to use a cosigner when you apply for education loans.
Invest a Fixed Percentage of Your Income
You don’t need to get fancy about this step, but consider putting about three percent of your income into an investment fund like a stock plan, precious metals, or an index fund to set yourself up for the future. Speak with a discount broker to find out what your options are.
The wonderful thing about planned investing is you can literally set it and forget it because most brokers and investment advisors can get you into conservative plans that build very slowly over time and require low contributions on your part.
Monitor Credit Card Use
There’s nothing wrong with having credit cards. It’s how you use them that makes the difference. The wise way to handle the plastic is to use it for emergencies, convenience, and to build your credit score. If you’re stranded with a broken-down car and need to get a tow truck, a rental vehicle, and pay for repairs, you might not have access to enough cash to cover everything.
That’s a valid emergency. If you stop for fuel and have no cash, it’s okay to use a card as long as you pay it off at the end of the month. The goal is to keep your usage at or below 10 percent of your limit. When you do that, the bureaus will usually end up adding to your scores. Take the time to make a detailed monthly budget.
It’s amazing how much money you can save just by seeing where every dollar goes. Some people credit budgeting with helping them get their finances under control, even when they do nothing else.