Be honest. Are you financially surviving or thriving? Do you see money as a safety net, or is it a tool for change in your life? Do you feel financially secure?
If you’re anything like me, you probably have big dreams and goals for your life. You can visualize them, and you’re constantly working your butt off to try to reach them.
Am I preaching to the choir or what?
Perhaps unsurprisingly, these goals and dreams often intersect with aspirations to grow our wealth because these dreams often can only be achieved if we have the financial capacity to make them happen.
Now, let’s not kid ourselves - building wealth and achieving financial success is not easy. If it was, everyone would consider themselves financially secure (on the contrary, according to a recent study by Fidelity Investments, 60% of Americans are concerned about their finances).
But with the right money moves and consistency in your efforts, you can grow your wealth and achieve financial freedom, whatever that looks like to you.
Anthony Robbins couldn’t have said it better, “It’s not what we do once in a while that shapes our lives. It’s what we do consistently.”
So let’s take a closer look at some of the money moves you should consistently make now to secure your financial future.
Short Term Goals You Should Make For Financial Security
- Make your financial goals SMART
- Pay off high-interest debt
- Beef up your emergency fund
- Read personal development books
- Understand your cash flow
- Automate your savings and investments
- Eliminate an expensive habit
- Up your 401k contribution
1. Make your financial goals SMART
Money can be very sneaky. Have you noticed? It can easily find a purpose if one is not set for it. It is very difficult to be responsible with your money and frugal if you're not working toward set goals such as retirement savings, an emergency fund, or a down payment for a house.
And get this: You are 42% more likely to achieve your goals if you write them down. Writing helps you visualize your future, prioritize, and understand the impact that your actions now can have on your future.
Start by writing out the main financial goal for this year, make it SMART, then go from there.
Related: How to set SMART financial goals
2. Pay off your high-interest debt
If you have a debt, you're not alone. The average debt balance in the U.S. in 2020 was a whopping $92,727!
Simply put, debt can be a major liability for your finances. If you are in debt, a budget can help you plan a debt payoff strategy, without which you might find yourself in constant financial struggle.
Even if you are thinking about saving and investing, you need to ensure that you are in good shape before you start. If you have a credit card debt, with the average credit card interest currently at 16.12%, the debt will likely drain your resources because no investment will consistently outperform such a high APR.
Building credit is another way to set yourself up for financial success. Good credit gives you options when you need them - like the ability to get a decent rate on a mortgage and getting you cheaper rates on insurance.
3. Beef up your emergency fund
Personal finance experts disagree on a lot of things, but an emergency fund is one thing that they all get behind. And for good reason. Having an emergency fund is the backbone of any financial plan.
It can be especially crucial to have a financial buffer if you are already in debt to avoid relying on high-cost solutions such as credit cards.
What’s more, financial emergencies come up all the time. In fact, within the last year, 28% of American households experienced a financial emergency.
Despite this fact, nearly 4 in 10 American households would not be able to cover a $1,000 emergency.
Ideally, the goal is to have about 3 - 6 months of your essential expenses in your emergency fund, but a good place to start is $1000, which can cover basic emergencies.
That said, with the average cost of an emergency in 2020 at $3,518, it is evident that $1000 should only be the beginning. Grow your emergency fund over time to fit your and your family’s needs.
Remember, this is your financial plan and your emergency fund. There is no wrong amount to save for your emergency fund, as long as you hit the 3 months of essential expenses minimum that is recommended. Some people save 3 months of expenses, others up to 3 years of expenses. When deciding what works for you, think about your risk tolerance, financial goals, the health of your family - anything and everything is fair game to factor in. The goal is for you to feel comfortable about what you have stashed away for a rainy day.
4. Read personal development books
I know, I know...
You might be thinking, how am I supposed to set aside time to read books when I have other very real money moves to focus on?
I get it, but here's the thing, the right books will motivate and inspire you daily, influencing and challenging you with new perspectives and ideas to reprogram the way you think.
Personal development books often promote the power of positive affirmations which studies have found to motivate you and boost your self-esteem.
Among wealthy people, 88 percent read 30 minutes or more for self-improvement every day according to Thomas Corley, author of ‘Rich Habits’ which is based on a 5-year study of self-made millionaires.
5. Understand your cash flow
Listen: It doesn’t matter if you’re living pay-check to pay-check or earning a six-figure salary. If you want financial security, you'll need to understand where your money is going.
I'm going to take a leap of faith here and guess that you've heard of a budget. But unlike what you might have heard, budgeting isn’t about restricting yourself.
Budgeting is quite simply a plan for how you will use your money both now and in the future so it gives you the freedom to spend money on the things you love.
Budgets can also help you understand your cash flow - money coming in and money going out.
If you already have a budget, that’s great, refer to it to determine your current monthly cash flow (income and expenses), how much you’re saving and investing, and your debt pay-off.
Alternatively, refer to your credit and debit card transaction histories over the last few months to get a sense of your monthly cash flows if you don’t have a budget.
Related: 7 reasons why you absolutely need a budget
6. Automate your saving & investments
Automating finances is one of the best and most effective money-managing practices.
So what's the secret behind it?
Automating savings and investments takes away emotions (and oh, there can be so many emotions when it comes to money) so it is easy to incorporate into your current financial strategy.
And get this: Automating your finances is particularly effective when working towards a savings goal, managing recurring bills, and in your debt payoff strategy. This has to be one of my favorite ways to save towards a financial goal!
7. Eliminate an expensive habit
'I just don't know where it all went!'. We've likely all been there when it comes to money. For a lot of people, this is the sad reality month after month.
With so many competing priorities, it might be easy to lose track of where all your money goes. But being intentional with your finances and dedicating some time and effort to track your money is important if you’re looking to reach your money goals, and especially if you’re overspending in particular categories.
Here’s the interesting thing - studies have shown that you spend on average 15-20% less when using cash.
So how about you consider the cash envelope budgeting method if you are looking to curb your spending in a particular category?
When the cash goes poof, then that's it, it's over, gone - until the next month at least.
OK, so you might not want to pass on that 3rd happy hour for the week that you know will cost you another $50. But when you remind yourself that you're saving up for that house downpayment, it will be much easier to ask your friends to join you for some (more affordable) drinks at home.
Curbing your spending helps you maximize your savings and reduce financial stress. There’s no more hiding around these parts friend. Let’s get your spending in order so that we can supercharge your financials. Your future self will thank you!
Related: 5 Signs that you are living beyond your means
8. Up Your retirement savings contributions
Regularly increasing your retirement contributions to your tax-advantaged accounts such as the 401(k) and IRA is one of the simplest, most overlooked money moves you can make each year.
News flash: Retirement accounts are built to incentivize us to contribute to them, so they are innately quite beneficial to us.
For example, many companies match 50% to 100% of employees’ 401(k) contributions up to a certain percentage of their salary as part of their employee benefits package. This is quite simply free money that you shouldn’t be leaving at the table.
A gradual increase in your retirement contributions up until you hit the sweet spot, aka max out on your retirement accounts, can quite literally result in hundreds of thousands of dollars in your saving and investment career.
A National Study of Millionaires found that 80% of net-worth millionaires in the study said that investing in their employer-sponsored retirement plan was the main way they reached millionaire status.
You can let that simmer for a moment - I know I had to.
What’s more, retirement accounts allow you to defer paying income taxes on the money you save for retirement, allowing you to have more money in the account, and consequently, more growth as a result of compounding interest.
Related: How compound interest can work for you
You can start being the boss of your money and attain financial security. That starts with seemingly small but very impactful short-term financial goals that you can start making today.
What's stopping you?