In today’s world, it seems that everyone is striving for financial security.
With the cost of living continually on the rise and a steady stream of news stories featuring people who have lost everything in recent stock market fluctuations, it can be difficult to see any light at the end of the tunnel when it comes to your finances.
However, while there are a number of external factors beyond your control that may be working against you right now, there are also lots of things you can do to improve your financial situation.
If you are serious about saving money and investing for the future, then a good place to start may be by taking a look at your current financial habits and getting to know where your money goes each month so that you can begin chipping away at unnecessary expenses and build up an emergency fund.
What Does $100k A Year Look Like?
When you think of what $100k a year looks like, you may envision a big house or an extravagant vacation.
However, there are actually many ways that your life could change when you manage to save $100k a year.
- You could pay off all of your debts, including credit cards and student loans.
- You could live comfortably for 3-4 years without having to work.
- You could have the ability to make investments in stocks and bonds.
- You would be able to retire at age 63 with an annual income of approximately $39,000.
How Do You Achieve Financial Independence?
Financial independence is the idea that you are able to provide for yourself without depending on others. It’s a concept that can seem incredibly daunting when you consider how many different factors contribute to it, but it is one worth pursuing nonetheless.
The best way to achieve financial independence is by pushing your finances in a positive direction. This means having savings in the bank, keeping track of your spending, and focusing on finding ways to save money on things like entertainment or dining out.
Additionally, investing in stocks and bonds can be an excellent way to grow your wealth over time as long as you do your research before buying into any investment opportunities.
How To Get To Financial Independence
In order to have financial independence, you should first determine what your individual goals are.
If you’re looking to retire by age 65, you’ll need to save a lot of money for the next 30 years in order to live comfortably throughout your retirement years.
However, if you’re only looking for a comfortable retirement with enough left over each month for some travel and some fun, it may not be necessary for you to put away quite as much money.
It all depends on what is most important to you and how much time and energy you want to dedicate towards achieving that goal.
Once you know exactly how much money you’ll need in the future, then it is time to start saving!
If possible, try using an online tool like Mint or Personal Capital so that at the end of each month all your expenses are totaled up easily and can be compared against the amount saved.
Setting aside a fixed percentage of your income into savings every month will ensure that there is always something saved with which emergency funds can be built upon in case something unexpected happens like unemployment or a medical emergency.
If possible, try also taking advantage of any employer opportunities where the employer matches contributions made into your 401(k) account up-to-2% or 3% (depending on how much they match).
Tip: Click here to read more about the lifestyle of people making $100k a year or more.
Figure Out Where Your Money Goes
It may seem overwhelming to try and figure out where your money goes each month, especially if you are just starting to budget. However, it’s important for you to figure out where your money is going so that you can make a plan for your future.
The best way to figure out where your money goes is by identifying the different expenses you have. A lot of people are surprised by what they find when they sit down and tally up all their monthly expenses.
You might find that some of the biggest expenditures in your budget are things like rent or car payments, which can be hard to track because they usually happen monthly and over time but are not always lumped together.
Cut Back On Unnecessary Expenses
The first step in getting your finances back on track is to figure out the root cause of the money leaks that you have been experiencing.
What are your monthly expenses? Where does your money go? Are there any areas that you spend more than you need to each month, or could you reduce spending just a bit to make more room for savings and investments?
By understanding what you need and what you don’t, it will be easier for you to cut back on unnecessary expenses without sacrificing too much.
For example, if you are spending too much on eating out, then try and cook at home instead of dining out. If your car is in need of repair or replacement, then buy used or get rid of it altogether. If your phone bill seems a little high each month, then consider switching carriers or upgrading your plan.
And while saving might seem like an uphill battle when you’re looking at how much is spent every day, every week and throughout the year, thinking about ways that these expenses can be reduced will help ease the pain of being financially conscious.
Build An Emergency Fund
An emergency fund is a great way to prepare for any potential financial emergencies in the future.
You should have enough saved up that you can cover at least three months worth of living expenses. This way, if your car breaks down or you lose your job, you are still in good shape.
Here are some other things to consider when building and maintaining an emergency fund:
If your budget is tight each month and you just can’t afford to put anything into your emergency fund, set aside money from each paycheck that will go toward it. This will be a slow process, but it will help build up the amount of savings that you need.
Make sure that you create a written plan for how you will use the money in your emergency fund as well as how much it will cost each month so that you can be more strategic with how you allocate the funds.
Create a list of all of the things that make up your current monthly budget and note where any extra income could come from so that you can easily see where to put any money from any unexpected sources into.
Tip: Learn how to build an emergency fund of $10k over the course of one year.
Conclusion
If you want to achieve financial independence, it’s important to know where your money goes. This can be accomplished by keeping a budget and being mindful of what you’re spending while making $100k a year. Plus, there are always many other ways to save and make extra cash!