Millions of American citizens have incurred debts and failed to build enough assets to secure their financial future. This downturn financial situation will make it difficult to give shape to your dreams and become a wealthy person despite your hard work. The following are some crucial steps that will help you to recover from financial crisis to build your wealth.
1. EDUCATION: A proper financial education can pave the path for a smooth journey from debt to wealth building. Once you review your financial situation and understand the reason for you not achieving your goal, then you can resolve your problem with the help of this financial education.You might require time to adapt to the new change where you need to understand saving and investment is more important than your short term pleasures. But this is only possible through proper financial awareness. You cannot change your mind set with the wave of the wand. To accomplish this Herculean task, you need to be dedicated towards your financial planning.
2. BUDGET: Curb your expenses so that you can pay off the debts without taking out a new loan. Your priority task will be to lower your monthly expenses so that you can save more cash without splurging on unnecessary things. Creating a budget can help you to stay within your means.
Planning a budget is not a difficult task; you just need to be patient and organized. Maintain a spread sheet and make two individual columns. Keep the left side of the column for your income where you list all your consistent sources of income. The other column on the right hand side is for your expenses. Under the heading ‘expenses’, list all the things which contribute to your expenses. Try to review your budget plan extensively so that you can understand where your money is actually flowing out. Restrain yourself from over expenditure and if you are unable to manage your expenses, then restructure your budget plan according to the present financial situation. Once you start reducing your expenses, you can see a positive cash flow. Avoid going out for lavish dinner or spend a fortune over a luxurious vacation. Even the small expenses like late night movies and meeting friends over coffee can cost you a considerable amount. Rather, arrange a small get together at home and organize a budget friendly dinner. This will help you to remain within your means as well as get out from the life of isolation.
If you are crushed under the burden of debt, then you can opt for snowball strategy. Start paying from the lowest to and gradually move towards the highest debt amount. Try to build momentum each time you pay off a debt in an ascending order. In this way, you can wipe out your financial woes.
3. INVESTMENT: Once you have paid off your debts, start investing your hard earned cash for future profit. Depositing in the bank will not be very beneficial, rather look for investment options that will help you with passive income.
Start making small investments and use debt leverage to increase your returns. Broadening your investment options will help you with passive income. These are the few basic concepts that you need to master with the help of financial education. You need to modify your mode of expenditure and investment according to your changing financial situation.
Evaluate your investment options. Investing in assets can give you profitable income. As the investment plans are long term goals, ensure that you hold on to your strategies for capital gains. You can get investment plans at a lower price and sell it when the market rises at a higher price. Sell your assets so that it can fetch you fruitful results.
These are the 3 simple but effective ways to build your wealth and if you follow the last two steps diligently, then you can avoid incurring financial burden and finally be debt free.
By Myrina Stein
Myrina Stein is a regular writer for various finance related Communities including Oak View Law Group and CDFA. She is a Post Graduate degree holder in Finance from a reputed University in California and right now working in a Finance Consultancy as a Project Manager.