In the United States, the average person has approximately $52,940 of debt, most of which comes from mortgage loans.
Unfortunately, having a large amount of debt causes your credit score to lower and affects your ability to get a low interest rate on loans. Further, debt can cause you negative emotions such as anxiety, stress, frustration, or even depression.
Setting yourself up for financial independence may seem impossible if you are up to your eyeballs in debt, but there is hope! This post will consider three financial wellness tips that you can implement today!
1. Get a Handle on Your Expenses
If you never have money and continue to accumulate more and more debt, it is time to monitor your spending habits. Calculating your expenses for the month will tell you whether your spending more than your earned income and give you an idea of what changes you need to implement.
Next, you should create a reasonable budget using the 50/30/20 rule. Following this plan, you should aim to spend less than 50 percent of your income on essentials, use at least thirty percent for paying off debt or saving, and no more than twenty percent for non-essential expenses.
2. Create an Emergency Fund
If you have no savings, you can start by creating a $1,000 emergency fund. Then, if an expense comes up unexpectedly, such as your car breaking down or paying an expensive hospital bill, you won’t be without money to pay your bills.
Even if you follow a tight budget, you can always find ways to reach your savings goal a bit easier. Consider just a few:
- Make coffee at home
- Carry a reusable bottle instead of buying drinks
- Use coupons and reward membership discounts
- Take advantage of credit card points
- Check out books from the library instead of purchasing them
Of course, these are just a few ideas, and there are dozens of creative ways to save money!
Once you have reached your $1,000 saving goal, you should start creating another savings account with sufficient money to cover your expenses for three to six months. Doing so ensures that you can pay your bills even if you lose your job or experience a sudden illness. And, remember to keep this money in a savings account with a high interest rate!
3. Pay off Your Debt
Even if you have a lot of debt, you can take baby steps to pay it off. Start with the smallest loan you have and move up from there. Debt-free living takes time, but it is an essential step to becoming financially independent.
If possible, you can consolidate all your debt onto one low-interest loan, which will make managing your payments much easier and keep you from paying high interest rates.
Of course, you may need to improve your credit score to obtain a loan. A great way to find out whether your credit is good enough is by performing a credit score check. Then, discover more information about improving your rating!
Your Journey to Freedom Starts with These Financial Wellness Tips
If financial independence is your ultimate goal, these tips will put you on the right track! But, of course, you’ll need to consider other factors, such as saving for retirement and building your wealth through investments.
Therefore, if you would like more financial wellness tips, be sure to check out more of our expert content!
The post Financial Wellness Tips: 3 Steps You Need to Take for Financial Independence appeared first on ArticleCity.com.