You dream of what your life should look like. What’s stopping you from living that life? For most of us, the answer is simple: We don’t have enough money to fund the life we want to live.
There’s always something that comes up – an unexpected bill, a car that needs repairing, a family member who desperately needs to borrow some cash. As a result, our dreams get pushed to the side.
But what if I told you there is a way to fund your dream life? It just requires a little strategic planning on your part.
Not sure where to start? I’ll share with you 6 simple steps to create a strategy to fund your life. But before you get started, you need to lay the groundwork.
First, get prepared. I’m talking about being mentally and physically prepared. Money is emotional, and it’s important to keep your bigger goals in mind as you’re going through the not-so-fun parts of your strategy. There will be times when you want to give into your short-term desires, but it’s important to stay the course. I promise it’ll be worth it in the end.
Secondly, you need to set goals. A good way to see if you’ve made meaningful progress toward funding your dream life is to create smaller milestones to hit along the way. For example, if one of your goals is to have $50,000 saved up in five years for a down-payment on a house, you could break this down into smaller milestones by calculating exactly how much you’d need to save every month to help achieve your goal.
Next, I suggest seeking help from a professional. If the roof was leaking on your house, most people wouldn’t repair it themselves! They’d hire a professional. In the same way, if financial planning is not your expertise, don’t try to navigate your finances alone. Seek out a professional financial advisor who can help you create a financial strategy based on your individual needs.
Lastly, be flexible. Life happens, so keep an open mind. As with any plan, it’s important to be flexible and adapt to any bumps you may hit along the way.
Now let’s dive into the 6 simple steps to fund your life.
Step 1: Create a Budget
Think of your budget as the foundation you build your financial strategy on. Knowledge is power, and your budget gives you the power to understand your current financial situation.
The goal of your budget is to track your spending, saving and the progress you’re making toward your financial goals. As you move through your financial strategy, you can adjust your budget as needed.
There are several digital budgeting tools out there like You Need A Budget, Mint and Tiller. If you prefer to do it yourself, you can also find free budgeting spreadsheet templates online, like this one from PAX Financial Group.
Step 2: Decrease Spending
Spending is the one area you have the most control over. Start by listing out the “extra” purchases you have every month. What can you do without?
Could you exercise at home instead of paying for a gym membership? Could you get by on one TV streaming subscription instead of three? Could you make coffee at home instead of stopping by the coffee shop on your way to work?
If you can’t cut something out completely, work to decrease your spending in that area. If your grocery bill is outrageous, for example, buy off-brand items instead of name brand, or shop at a cheaper store altogether. It may surprise you to see how quickly these little purchases add up.
Step 3: Increase Savings
As you work on ways to cut down on spending, also think about ways you can increase your savings. There are obvious ways to increase your savings like starting a side-hustle or renting out your spare room on Airbnb.
But what if you don’t have time for that? If that’s the case, focus on saving the “extra” money you may get throughout the year, such as:
- Extra paychecks. If you get paid weekly or bi-weekly, you’ve probably noticed that you get an “extra” paycheck every few months. Instead of treating yourself to something fancy, throw this money toward debt or savings.
- Bonuses. Bonuses are like extra paychecks. If you’re lucky enough to get a bonus from your employer, it may be tempting to spend it on extravagant purchases – after all, it’s money added on top of your salary. But fight the urge and put it toward retirement or use it to pay off high-interest debt. A local financial advisor (San Antonio) can review your specific situation and suggest the most appropriate place to put this extra money based on your personal situation and goals.
- Tax refunds. A tax refund is not free money given to you by the IRS. Confused? Here’s an example: Let’s say your car needs a new transmission, and the mechanic quotes you $2,000 to fix it. You prepay him the money. Afterward, he tells you it only costs $1,800, so he gives you $200 back. Is this money a free gift from the mechanic that you can spend however you please? No. It’s money you overpaid to the mechanic. Tax refunds are the same way. It’s simply a refund, not a bonus.
- Birthday money. Sure, once you reach a certain age, the birthday money stops rolling in. But if you do still receive some cash for your birthday or any other holidays, consider stashing it away.
- Credit card rewards. The beautiful thing about credit cards is that they can be a great way to earn free cash. If you’re racking up rewards points, go ahead and redeem them straight into your savings account.
Step 4: Have a Financial Safety Net
I cannot stress enough the importance and benefits of having an emergency fund! Most experts recommend saving three to six months of expenses, but this will vary based on factors such as income reliability, expenses, dependents and age. Again, talking with a local financial advisor (San Antonio) who understands your pain points can help you appropriately plan depending on your specific situation.
Whatever the total ends up to be, save enough money for you to have peace of mind in the event something unexpected happens. Some common, unexpected events include:
- Getting married
- Purchasing a home
- Having a child
- Caring for an aging parent
- Changing jobs
- Grieving the loss of a spouse
- Going through divorce
Step 5: Pay Off Debt
Debt can be the silent killer of your quality of life because it keeps you living paycheck-to-paycheck. If you have debt that’s hindering you from funding your dream life, consider paying it off as quickly as possible. There are many debt payoff methods to consider. Talk to a professional about which method might be right for you.
Once you pay off a debt, you can put the money you were allocating for that debt into savings. For example, if you were paying $200 a month toward a credit card and you just paid it off, continue saving the $200 a month. It’s an easy way to boost your savings.
Step 6: Manage Your Wealth
As you begin to pay off your debts and save more money, you can begin to accumulate wealth. As a result, you may have bigger financial goals. When this time comes (or if you’re already there), seek guidance from a trusted financial advisor.
A financial advisor can help you manage your wealth all the way through your retirement years. You’ll have an unbiased, third-party helping you maximize investments and dodge any curveballs that may come your way.
With a strong financial strategy in place, you’re giving yourself the freedom to live the life you’ve dreamed of. So, go ahead and take the first step. Create a financial strategy to fund your life, and start chasing those dreams.