Here are some proven strategies that can help you achieve your financial goals.

Step 1: Create a Monthly Budget

“A budget is about telling your money where to go, instead of wondering where it went” Dave Ramsey.

In order to get a better idea of where your money is coming from and where your money is going, you guessed it, you should look into creating a budget.

Make a list of your sources of income.

Income: List your monthly income, salary.

Expenses: Record your expenses.

Do the calculation, compare income to expenses.

Calculate the difference: Are you saving money or borrowing money?

If you have more income than expenses, now it is time to start saving or increase the amount you are saving.

If you have more expense than income, carefully review your expenses.

Make adjustment when you can, especially in the wants area of your expenses.

At minimum, get your expenses in line with your income and if possible, start saving.

Step 2: Build an Emergency Fund

This is your first priority. Emergency funds should equal six months of your living expenses.

Unexpected problems may arise, and your emergency savings fund help reduce your worries.

Having an emergency fund is one of the benefits of having a budget.

You can save small amounts of money each week, two weeks, or month for emergencies.

When creating a budget, put an amount for unexpected items.

Do not touch this money unless there is a true emergency.

An emergency fund has two purposes:

  • To provide a safety net against unexpected expenses (e.g., your furniture needing to be replaced or your car breaking down)
  • To cover living expenses if a wage earner loses his/her job or becomes disabled.

An emergency fund is not for:

Holiday presents, Routine repairs (e.g., car breaking down or appliance needing repair), Replacing household furniture, Vacations.

These expenses should be planned for and covered under your budget.

Step 3: Save and Invest

Assuming you have a sufficient emergency fund and paid off your bad debt: the next step to accomplishing your financial goals is to begin saving and investing your hard-earned money whenever possible.

You’ll have better investment returns in the long run the earlier you start investing.

Start now, it’s never too late to start investing.

Take the 10% or more of your income and direct it to investment account.

Step 4: Pay off “Bad” Debt

Assuming your emergency savings fund is sufficiently funded, and assuming you went through the budget exercise, now it’s time to look at your overall debt picture.

Debt is simply money that is owed by you.

Some types of debt include a mortgage, a car loan, and likely one of the most common forms of debt: Credit card debt.

Now, there are some good types of debt and there are some bad types of debt.

“Isn’t all debt bad?” you may be asking yourself right now.

And the answer is technically yes, debt is not good, but there are some types of debt that are worse than other types of debt. A bad type of debt would be credit card debt.

One of the reasons why it is considered “bad” is due to the incredibly high-interest rate, oftentimes ranging up to 20% or more.

You don’t want to be paying 20% of interest on top of the principal, or the original amount of what you owe.

To compare that 20% interest figure, look at some recent mortgage rates where interest figures range from roughly 3.1% to 4%.

You guessed it, a mortgage is oftentimes considered “good” debt.

How can you pay more toward your “bad” debt? By looking back at your budget.

Once you are able to cut your expenses by 10% or more, you can then move this “saved” money toward paying down the “bad” debt and moving one step closer toward your financial goals.