There are plenty of reasons to have anxiety around money. Many of us are working harder than ever and feeling like we have nothing to show for it. Whether you’re overwhelmed with student loan debt or simply unsure on how to manage your personal finances, you’re not alone!
If you’re feeling anxious when it comes to money it’s time to get intentional and take control. Don’t overcomplicate it; make it simple, and focus on small wins!
Achieving financial freedom empowers you to live your best life—whether that means making a career change, finally planning that big trip, or making frequent donations to your favorite charity. Take some time to really explore what financial freedom would mean for you and use that as your “why” as you make decisions for your money.
Here’s some simple steps to finding financial freedom in 2021. (Don’t worry, you won’t have to give up your daily latte!)
Budget. Budget. Budget.
Whether you want to use a notebook, an excel document, or download an app, I always recommend a simple budget as the first place to start in taking control of your money.
Create a zero based budget where every dollar of expected income for the month is allocated to either spending, paying off debt, or saving. This doesn’t mean you limit your spending, rather it focuses you into spending your money on the things most important to you that month. Your budget is for your eyes only, so no shame if you value having take-out 5 nights a week!
Even more important than creating a budget is to track your spending against it. This allows you to make adjustments when needed and be more intentional.
Lastly, stick with it. I guarantee your first three months will be used to find your rhythm. You don’t need to strive for perfection, just strive for consistency.
Get rid of debt.
If you have consumer debt (yes, this includes a car payment!), your main focus this year should be getting rid of it. I’m not sure when or how we started determining whether or not we could afford something by the monthly payment, but can we make a pact to quit normalizing this? The fastest way you can build wealth is to get out of debt.
My recommendation is to list out all your debts out and rank them in the order you’d like to pay them off. If you’re someone who needs quick wins—list them smallest to largest and start at the top of the list. Don’t over complicate this, just focus on one debt at a time, finding as much excess income in your budget or cash savings to pay it off. Once your first debt is gone, move onto the next one on the list and keep the momentum going.
Once you’re debt free (WOO HOO!) the most important thing you can do is build an emergency savings account. This will help you stay out of debt if an unexpected expense arises (think major car breakdown, not an unplanned dinner date).
Align your values with your money.
Once you’re out of debt with an emergency fund, it’s time to get on the offense with your money and start building wealth to achieve your life goals. Make sure to find a financial advisor to help you manage your investments and create a long term plan.
Start saving for retirement: Target 15% of your income and make sure if your company has a match that you’re taking advantage of it. The earlier you’re able to start saving for retirement, the more time you have for your money to grow.
Take the time to really think about what you value most in life and how money can enhance those things. For example, if you love hosting family gatherings, you might want to set a goal to buy or upgrade your house. I recommend focusing on 1-2 goals at a time. Keep evolving the list and reprioritizing as things come up.
When in doubt, keep it simple and don’t try to do too many things at once. Make it your mission in 2021 to take control of your personal finances and plan your path to financial freedom. Let’s do this!