Building a sound financial advisor foundation is crucial to meeting daily expenses, saving for retirement and taking advantage of opportunities that arise. This is especially crucial for freelancers and entrepreneurs whose income may fluctuate considerably month to month.
Never too late to begin practicing sound money management and improving your financial wellness, here are a few key steps that will get you on your journey:
1. Create a Budget
Start building a solid money management strategy with creating a budget. A budget will enable you to understand how much money you are making each month, how much of it goes towards expenses, and what savings opportunities exist within each month.
Planned savings make it easier to resist unnecessary spending. Setting an ambitious financial goal can also help prevent temptations like purchasing a new TV from overriding your good intentions.
An emergency fund is important in case of unexpected expenses and will help avoid debt payments from becoming additional sources of stress. Paying off debts also improves cash flow and makes reaching short and long-term goals much simpler.
2. Manage Your Debt And Seek for Financial Advisor
Debt may have an unfortunate reputation, but it can actually be used to your advantage in certain instances. A mortgage allows you to own a home whose value increases over time while other debts help reach specific financial goals.
Learn to develop a strong financial base by becoming adept at debt management, which will allow you to lower interest costs and save more money over time.
Start by compiling a comprehensive list of all of your debts, with their respective interest rates and minimum monthly payments. Next, employ a debt repayment strategy such as debt snowball or debt avalanche to quickly pay down debts faster. Finally, put any extra money toward repaying these debts such as tax refunds, work bonuses or gifts into paying it down faster.
3. Save for Emergency Expenses
An emergency savings fund is an integral component of protecting yourself against unexpected expenses and avoid turning to credit cards or loans, which may quickly turn into debt that becomes difficult to repay.
To save for an emergency, start by tracking your income and expenses. Next, determine how much of each paycheck can be allocated towards an emergency savings account each payday; or set up automatic deposits into such savings accounts.
Emergency funds should cover three to six months of living expenses. Although this goal might seem ambitious at first, it’s essential that we stick with it!
4. Save for Retirement
An effective savings plan is integral to creating a strong financial foundation. A savings plan helps you avoid living paycheck to paycheck while eliminating debt – giving you time and space to save for the future.
Consider when saving for retirement the timing of your investments. Saving early gives you time to reap the benefits of compound interest while simultaneously decreasing how much money will be needed in retirement.
As it’s essential to realize, Social Security won’t provide enough income in retirement and additional sources must be found to supplement it. Working with a fee-only Certified Financial Planner or using an online retirement calculator may help determine how much should be saved to live the lifestyle you envision in retirement.
5. Invest in Your Business
Investing in your business can generate an ROI and strengthen its financial foundation, while giving you confidence to tackle other important goals.
Investors require more than just a business plan when looking for investors; they want enthusiasm, an understanding of your sector and guidance – this makes finding the right investor so essential.
Establishing a sound financial foundation takes time and dedication, but the rewards can be enormous. By employing smart strategies, you can achieve long-term financial goals as well as weather unexpected financial storms more successfully. Get started now with these eight key steps – you won’t regret your investment later on!
6. Pay Off Credit Card Debt
An important step toward meeting long-term goals is building a solid financial base. Doing so allows you to avoid living paycheck to paycheck, cover unexpected expenses more easily, and invest for the future.
Step one in paying off credit card debt is to create a budget so that you can track where all of your money goes each month and control spending effectively while planning the most effective approach for eliminating it.
One strategy is to focus on paying off debt with the highest interest rates first and then working your way down. Another is limiting spending by only using credit cards when absolutely necessary or only using them in emergencies. You could also consult a financial advisor in finding the most suitable debt payoff strategy for yourself.
7. Pay Off Student Loans
An effective financial foundation starts with having an in-depth knowledge of your income, wealth and liabilities as well as responsible daily spending habits and long-term goals.
For example, if your student loans carry high interest rates, prioritizing debt payments to get rid of them faster can save money and help pay them off quicker. This might mean eating out one or two fewer times each month or putting off purchasing that new mattress that may otherwise have been planned on buying.
Use any unexpected cash windfalls (such as inheritance, lottery winnings, insurance settlements, work bonuses, tax refunds or birthday presents) to reduce debt faster.
8. Work with a Financial Advisor
Financial health is essential to building the life you envision for yourself. From low-income earners living paycheck to paycheck to households with six figure incomes squandering away their funds, building a solid financial foundation will enable smarter decision making and enable you to weather unexpected financial storms with greater ease.
Working with a financial advisor can help lay a strong foundation by giving you an accurate view of your current financial status and setting realistic financial goals. When selecting an advisor, make sure they have an excellent reputation, experience, and fees before making your selection.
Before hiring an advisor, review their Form ADV on FINRA’s website and check for any disciplinary actions on BrokerCheck.
