5 Power Moves Every Financially Savvy Person Should Make
Money is an important part of life and makes the world go round. Understanding how to manage it is essential for financial success. But not everyone knows what steps to take to ensure they are making smart financial decisions that will help them reach their short-term and long-term money goals. No matter where you are on the financial ladder, it's wise to make smart financial moves. Having control over your finances can give you more freedom and security. In this article, we'll discuss some of the power moves that every financially savvy person should consider making. From beginner budgeting tips to money management strategies, these actionable steps will help you take charge of your finances and reach your financial goals.
Power Move #1: Create a Budget
Creating a budget is the first power move anyone should make when they're ready to take control of their finances. A budget is essentially a plan for how you will spend your money, and it's crucial to have one if you want to achieve financial success. Without a budget, it's easy to overspend and end up in debt.
To create a budget, start by tracking your income and expenses for at least one month. This will give you an idea of where your money is going and where you can cut back. Once you have tracked your income and expenses, create categories for each expense type such as housing, transportation, entertainment etc., then assign a dollar amount to each category based on what you can realistically afford. This will help ensure that you are not overspending in any particular area of your life.
Remember that creating a budget is only the beginning - sticking to it requires discipline and commitment. (This is where hiring a Financial Coach can really help you succeed!). Get creative in your planning! The first step is to create a basic outline of the things that are important to you, such as travel, education, and hobbies. We call these Financial Values. Then, start thinking about ways you can save money to reach your goals that represent these values. For example, if you want to spend your next vacation in a tropical location, consider planning an extended staycation this year where you can make the most of local amenities and attractions.
Power Move #2: Pay Down Debt
If you want to become debt-free and financially independent, paying down your debts is a crucial step. Creating a budget that outlines your income and expenses, will help you identify areas where you can cut back on spending and allocate more money towards debt repayment. Then it's time to get rid of all the unnecessary spending - and one of those is debt bills. Get those paid off ASAP.
One strategy to debt payoff is by prioritizing high-interest debts first, such as credit card balances, as they can quickly accumulate interest and become overwhelming. This may seem like the most logical. BUT in order for a lifestyle change to stick, it needs to be a behavior that sees the impact quickly. So my favorite debt payoff strategy is known as the "snowball method".
The debt snowball method of debt payoff is where you pay off your smallest debts first while making minimum payments on larger debts. As each small debt is paid off, you move onto the next one until all of them are cleared. This approach can help build momentum and motivation as you see progress being made towards becoming debt-free.
Staying on track to pay down debt requires careful planning, discipline, and a commitment to making financial decisions that will have a positive impact on your long-term finances. Paying down debt may seem like an intimidating task, but with the right financial coach and mindset, it's achievable and can lead to greater financial freedom in the long run. Seeking guidance from a financial coach can also be beneficial in creating a customized plan for your unique situation.
Power Move #3: Set Financial Goals
Setting financial goals is an essential power move that every financially savvy person should make. It all starts with creating a beginner budget that outlines your income and expenses, allowing you to track your spending and identify areas where you can cut back. Once you have a clear picture of your finances, it's time to set goals that align with your values and priorities.
Financial coaching can be incredibly helpful for those who are new to goal-setting or struggling to stay motivated. A coach can help you identify realistic targets, break them down into smaller steps, and hold you accountable throughout the process. Whether you want to save for a down payment on a house or pay off debt, having a coach in your corner can make all the difference. Make a plan and stick to it. If you're not sure where to start, ask your coach for help or try one of the many online budgeting tools available.
Remember that setting financial goals isn't just about becoming rich; it's about creating financial security and peace of mind. By taking control of your money and working towards achievable targets, you'll feel more confident in your ability to handle whatever comes your way. So don't be afraid to dream big – with the right mindset and support system, anything is possible!
Power Move #4: Invest Early and Often
Investing your extra money early and often is one of the most powerful financial moves you can make. With the help of a financial coach, even beginners can create a budget that allows for regular investments. The earlier you start investing, the more time your money has to compound and grow.
But remember, it's not time to invest until you're debt-free. Investing returns will most likely be less than any debt interest you're paying, so having debt while investing is a losing game. Get that debt paid off first!
When you're officially ready to invest money, one way to do it early and often is through employer-sponsored retirement plans like 401(k)s or IRAs. These plans allow you to contribute pre-tax dollars, which means you'll pay taxes on the money when you withdraw it in retirement. Many employers also offer matching contributions up to a certain percentage, so take advantage of this free money by contributing at least enough to receive the full match.
Remember, every dollar counts when it comes to investing - no amount is too small! So when you're officially ready to invest, it may also be a good time to talk to a Financial Advisor for guidance.
Power Move #5: Build an Emergency Fund
One of the most crucial power moves that every financially savvy person should make is building an emergency fund. Emergency funds are a safety net that can help you get through unexpected expenses or emergencies without having to rely on credit cards or loans. While the amount of money you need in your emergency fund may vary based on your lifestyle and income, it's recommended to have at least three to six months' worth of living expenses saved up. So, for someone who has $2000 of expenses each month to get by on, $6,000 to $12,000 should be in a separate high-interest savings account, that is easily accessible if an emergency arises.
Building an emergency fund requires discipline and dedication. Start by setting a savings goal each month and cutting back on unnecessary expenses. You can also consider ways to increase your income, such as taking on a side hustle or negotiating a raise at work. Selling unused or unnecessary items at home is another great, and fast way to increase savings.
Building an emergency fund is one of the most important power moves in achieving financial stability and security. By starting small and making consistent contributions, you'll be better prepared for any unexpected expenses and have peace of mind knowing that you have a safety net in place.
Making smart choices is crucial for anyone who wants to be financially savvy. The five power moves we have discussed are just the tip of the iceberg. There are many other steps you can take to improve your financial situation and build a secure future for yourself and your loved ones.
One key takeaway from these power moves is that it's important to be proactive about managing your money. This means setting goals, tracking your expenses, and finding ways to save and invest wisely. It also means being aware of potential pitfalls such as debt, overspending, or failing to plan for emergencies.
Ultimately, becoming financially savvy requires discipline, patience, and a willingness to learn from both successes and failures. That’s where a Financial Coach can be a huge benefit. If you're looking for a support to get you on the right track, set up a free 15-min Q&A call today to see if I’m a good fit for you.
Whether you're just starting out on your financial journey or looking to take things to the next level, remember that every smart choice you make today will pay dividends in the years ahead. So stay focused and keep moving forward towards a brighter financial future!
