Here’s how to improve your outlook and your financial situation.
- The rise in inflation has affected the finances of many people.
- In a recent survey, many young consumers in particular feel that they are not in a good place.
For many months, inflation has been wreaking havoc on consumers, forcing them to spend more on everything from gasoline to groceries to utilities. Not surprisingly, that’s causing many people to have a more negative attitude toward their finances.
This is especially true for younger Americans. In a recent BMO Harris Bank Survey, only 65% of consumers between 18 and 24 years old say they feel secure about their financial situation. That is down from 75% during the last quarter of 2021.
If your personal financial outlook isn’t rosy, there are steps you can take to improve it. Here are three essentials to get you started.
1. Create a solid emergency fund
If you don’t have money in savings, you may be one unplanned bill away from financial ruin. On the other hand, if you make an effort to save money for unexpected expenses, that should only buy you more peace of mind. It pays to make construction a emergency fund a priority.
At a minimum, you should aim to have enough money in the bank to cover three months of essential bills. For better protection, try to cover six months’ living expenses.
Even if you decide to stick to the lower end of that range, it’s not a goal you need to achieve overnight. It will take time to build an emergency fund, and that’s okay. But once you start to make progress, you should start to feel better about your financial picture.
2. Pay off high-interest debt
It’s hard to feel good about your finances when you’re racking up more and more credit card interest every day. Instead of sinking deeper into a hole, make a plan to pay off your high interest debt. Once you get rid of it, you’ll have one less expense to worry about.
You may want to consider getting a side job temporarily to get the money to pay down your debt (by the way, you can also use those earnings to build your emergency fund faster). It’s also worth looking for ways to make your debt more affordable. That might mean doing a balance transfer or consolidate your debt into a lower-cost personal loan.
3. Start with retirement savings
You may be worried that you won’t have enough money to live on in the future. Once your emergency fund is solid and you’re clear of credit card debt, divert any extra money you have to a GO TO or a 401(k) plan. Even better: automate the process so you can stay on track with your long-term savings goals.
As a general rule of thumb, it’s smart to set aside 15% or more of your earnings for retirement savings purposes. But don’t panic if you still can’t reach that threshold. If you’re young, it means you have decades ahead of you to build retirement savings, so do your best to fund your IRA or 401(k) now with the goal of increasing your savings rate over time.
It’s not surprising to hear that so many young Americans lack confidence in their finances, but it’s annoying nonetheless. If you don’t feel good about your financial situation, follow the steps above to put yourself on a more positive path.
The best credit cards end interest until 2023
If you have credit card debt, transfer it to this top balance transfer card locks you in with a 0% introductory APR through 2023! In addition, you will not pay an annual fee. Those are just some of the reasons why our experts rate this card as the best option to help control your debt. Read the full review of The Ascent free and apply in just 2 minutes.