There is no one-size-fits-all approach when it comes to long-term Financial Freedom. But if someone is still paying off student debt well into their 40s, they have made a few mistakes along the way.
Building strong and effective financial habits is the key to success. And these practices are not just about collecting money, but creating a lifestyle that allows them to relax in the golden years.
Not sure where to begin? We’ve got you covered. Here’s a short guide explaining four powerful habits to reach financial freedom sooner than most people:
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Cut Down on Day-to-Day Expenses
It might sound a little tedious, but the core of financial stability is informed spending.
First things first, know the exact amount you’re spending every month. Start with big-ticket items like insurance, debts, utilities, rent, and groceries. Then, move to day-to-day expenses, such as dining out, shopping, or even weekly coffee runs.
Next, create a budget and stick to it. You can make a detailed spreadsheet to categorise everything or use the 50/30/20 rule. Allocate 50% of your income to needs, 30% to wants, and 20% to savings.
Our advice? Increase the allocated savings percentage as your income grows. You can also create a custom budget to track transactions and bills.
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Make Use of Savings Accounts
Opening a savings account is one of the best ways to build financial stability. You can earn interest on your money and also make use of automatic billing.
Types of saving accounts include:
- Regular savings accounts
- Easy access savings accounts
- Fixed-rate accounts
Consider using a savings comparison site to get detailed information on different credit card providers. Compare interest rates and earn money while saving like a pro.
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Manage Debt Wisely
Debt can slowly erode your savings. But it doesn’t have to hold you back. The key is to manage debt strategically to achieve your goals. Here are some tips you can follow:
- Know how much you owe. This includes your total amount of debt, monthly payments, interest rates, and due dates.
- Pay your bills as they come in. This is especially true with credit card bills.
- At least make the minimum monthly payment. This will help you avoid late fees.
- Pay off high-interest debts first. This will reduce financial stress.
- Make smaller and easily manageable payments instead of taking out more loans to make a large payment.
By strategically paying off debt, you can free up money for investing and wealth management.
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Use Credit Cards Wisely
Swipe now and pay later — credit cards are super convenient. But this convenience can turn into a nightmare if you don’t use them wisely.
First off, aim to pay off your balance every month. This is necessary for avoiding interest. Avoid reaching your credit card limit or taking out advances.
Moreover, paying off credit card bills promptly shows lenders that you’re financially responsible. This will increase your credit score, helping you get better loan terms later on.