So many of us struggle with our finances. Probably because few of us were ever thought much about the subject. If you are like me, you were taught a little something about saving and most likely had a piggy bank to put your money in so that you could save up for that special toy or item you just had to have. That was the extent of our financial planning. As least that is my case.
To piggy back (pun intended 😊) on the childhood concept of planning for your future goals…
What are your financial goals for 2021? If you have not thought about what’s right for you yet, let’s start at the beginning. I recommend three things you can do to improve your financial condition in 2021.
1. Build a $3,000 emergency fund
For well-being and financial freedom, one cannot but start from the concept of security. 48.3% of USA families cannot make it to the end of the month. The crisis of the pandemic has certainly had an impact, to be sure, but bad financial habits also determine this condition.
Building an emergency fund by setting aside around 3,000 Dollars may seem impossible, but it can be done with discipline and determination. An emergency fund will allow you to have savings available for daily unforeseen events.
How to do it? Start controlling and reducing your overspending by putting your savings in a digital piggy bank. You will watch your savings grow and will have the satisfaction of knowing that you can reach a financial goal.
You’ll see that in a short time, you will have a sense of financial security that you never imagined simply because you had the fortitude to stick to your plan.
2. Save 20% of your salary every month
Having constancy in saving is one of the fundamental rules for achieving great goals in the long term. Whether it is your first home, your car, or starting a family, these goals require sacrifices.
Starting as early as possible and maintaining the regularity of your savings is the best way to reach your goal.
A tip: think first of saving and then of consumption. Try to set aside 20% of your salary every month, month after month. If 20% is not doable at the moment, set a lower percentage and stick with it… consistency is the key.
Invest it in a mutual fund that will help you grow your sums. This strategy in financial jargon is called an accumulation plan. But more about that in future blogs.
Thanks to the strength of compound interest, the production of interest on interest, your capital can grow exponentially if you keep it invested with medium-long term horizons. The first step, of course, is having the funds set aside so that they are available to work for you.
3. Read a few books on personal finance & investment
Financial well-being goes hand in hand with the financial culture. Those with low financial understanding are less likely to hit their life-saving goals. It can be a bit daunting in the beginning but the more you read you’ll find that your comprehension and your confidence, not to mention your money management competence, will grow fairly quickly. AND you will be in a better position to enjoy your life now as well as plan for your future.
No time like the present! Start filling in your gaps by reading books on personal finance and investments. If English is not your first language but you have a good command of the English language, you will find yourself at an advantage. Even though the most famous finance books are now translated into all languages, reading them in their original language can give you that extra edge.
The most famous financial coaches in the United States have written books and produced content that has improved the lives of millions of savers. My personal favorite is Michelle Singletary. I’ll share some of her pearls of wisdom in future blogs.
Having a savings plan that includes putting funds aside for unforeseen circumstances and gaining knowledge about how to handle your finances are essential first steps to your financial freedom and well being.