5 Steps To Financial Independence
The word “thrifty” is rarely thought of in a positive sense but that’s not fair. If we continually spend more than we earn, our debts will eventually catch up and other words such as “default” or “bankrupt” might become more familiar.
Being thrifty doesn’t mean doing without – quite the opposite. Here are six simple tips to build up your savings – the first step towards achieving financial independence.
Create A Budget And Stick To It
Before you can get your spending under control you need to know exactly how your income compares to your expenses. There are many free online budgeting tools available, such as the MoneySmart Budget Planner found at www.moneysmart.gov.au. There is also a multitude of smartphone apps that can help you to record everything you spend. This can be an interesting exercise. At the end of every month, you can easily compare your total purchases and outlays to your budget. You might be amazed to see where your cash is actually going.
Be Debt Smart
Make a list of your debts and organise them in order of annual interest rate. Those with the highest rates (most likely your credit cards) should be paid off first, especially as the debt is not tax-deductible. It rarely makes sense to invest money to receive 5% per annum while you are paying credit card interest of 20% – or more. Your goal should be to pay off your card/s in full every month.
Time For A Mortgage Check-Up
Like all things, mortgage products change – particularly with interest rates at record lows. If you are more than five years into your mortgage, it could be time for a review. Check with your lender to ensure you’re getting their best rate. You might be astonished at the deals lenders are prepared to do to keep your business. Also, you could be paying for extra features that you don’t need.
Switch And Save
When was the last time you compared costs on your home/health/car insurance, phone plans, gas and electricity? By shopping around and negotiating a better deal you could save significant dollars on your monthly spend. There are helpful websites to make comparison shopping much easier but be aware that they only list providers who have paid to be promoted on their sites. It might be worth it to take the extra time and do the comparisons yourself.
Most people are amazed at how many gifts they buy each year, often at the last minute. By establishing a gift list and allocating a set budget for each recipient well ahead of time, you can progressively buy gifts on sale during the year. This will certainly help your cash flow and circumvent overspending by avoiding that last-minute rush (not to mention the added stress!).
As you watch your bank balance increase, enjoy the feeling of being in control and knowing you can have whatever you want with just a little discipline.
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