When I first started learning about personal finance, I was so excited. It was as if a whole new world opened up to me.
I felt like a kid in a sweet shop, but I had no idea what to focus on first. I wanted to know how to get out of debt, but also get create an emergency fund ASAP.
And what about investing? That sounded super exciting, too! There were so many ways to make my money grow: should I start by saving in high-interest bank accounts, or jump straight into stocks and shares?
If you’re anything like me, you’ll be standing in front of this veritable buffet of financial options, and have no idea where to go first. It can get really overwhelming!
But luckily, if you are interested in becoming more financially secure, there are a few general rules to keep in mind which will make it easier to get started.
Everyone’s situation is different, of course, but by following these three steps to financial success you will find it easier to avoid analysis paralysis.
3 Simple Steps to Financial Success
1. Start with ‘Focus’
I know it’s hard, but if you want to make progress, you have to commit to one financial goal at a time.
The goal you choose will depend on your situation, but for most people, the recommendation is to start by creating a basic emergency fund, of perhaps £1,000.
This is to get you over the financial hump of unexpected costs, such as your car breaking down or your laptop dying, which might otherwise mess up your well-laid plans.
If you are struggling to reach your goals, committing to one specific goal at a time will help you to move forward.
To know what makes most sense for you, you need to know your financial situation. What’s the most important thing for you? Is your financial priority getting out of debt, having more spending money each month, or saving for a house deposit or other major purchase?
If you want financial security and stability, top up your emergency fund to cover six months of living costs (or more, if you want to feel even more secure).
If you dream of getting out of debt, target any spare cash at paying off loans, overdrafts, and credit cards.
Clearing your debt should be very high up on everyone’s list of priorities, but in certain situations — such as if it is in the form of a low-interest mortgage, or on a 0% interest credit card — it can make sense to prioritise something else.If you dream of being debt free, target any spare cash at paying off loans, overdrafts, and credit cards.Click To Tweet
3. Make A Plan
It’s easy to get carried away with all the possibilities, but know that the time will come for all the other exciting things you want to try.
For now, you need to focus on one thing at a time, and by doing so you will get to the next point on your list much faster.
Your plan for getting out of debt and being more financially secure could look like this:
- Save an emergency fund of £1,000 by setting aside £X per month
- Pay off at least £X of debt per month/pay off all debt by [date]
- Start investing £X per month in a stock and shares, or in an ISA or pension
This is just an example, and your own situation and plans might look completely different. But the idea is that when you have a plan like this in place, you can figure out how long each step will take, and budget accordingly.
By following these three steps you will be well on your way towards the financial life you dream of, and can avoid slowing yourself down by getting side-tracked and taking de-tours along the way.If you want to make progress, you have to commit to one financial goal at a timeClick To Tweet
Ask yourself “What are my financial priorities?” and “What can I do to speed up my financial success today?
Jenni Syrjälä is a money coach who specialises in helping women re-write their money story and make friends with their finances on a practical level. She is passionate about helping women discover what she has learnt: that money doesn’t have to be stressful – it can be exciting, too!
(Image courtesy of FreeDigitalPhotos.net)