We’ve all heard the collective wisdom of every popular financial guru out there: save more, pay down your debt, max out your 401(k), and build an emergency fund. Sure that sounds good, but the reason people are looking for advice about money is because they don’t have any! I know plenty of people in debt because they can’t afford basic expenses like housing, childcare, food, healthcare, and transportation.
The best advice that I can offer is to accept the fact that it’s impossible to pay for life’s daily expenses and plan for every scenario in the future within a short period of time. Accept this fact and you’ll be better for it. I know everyone loves instant gratification, but truth be told, nothing built on a strong foundation was quickly done.
Here’s how you really start on the path to financial security:
Reduce Your Debt to Income Ratio
Start tackling just one long-term goal this year that will yield the maximum results: reduce your overall debt to 30% of all of your revolving credit. This may seem like a huge undertaking, but this really will have the greatest impact on your financial health. Reducing your balances on each revolving credit account to 30% will reduce the monthly payments you have to make each month, improve your credit score because you’re lowering your debt to income ratio, and reducing your overall debt.
Make More Money
Cue the side-eye emoji, right? This is not one of those easier said than done pieces of advice. I know the job market is competitive, but I also know a lot of us sell ourselves short. We don’t apply for that high paying job because we don’t think we’re qualified or don’t place the right amount of value on our experience and education. Well, stop doing that! Apply for every job that you’re interested in that offers an increase in salary and long-term stability. To be even more specific, try and aim for jobs that offer a salary 20% above what you’re making now. Then plan to use that money solely to pay off debt and later to save for retirement and emergencies.
Take these first steps and you may not have an emergency fund, but you’ll be one step closer to a financially stable life.