Great wealth is not necessarily what all people aspire to achieve. Even so, the desire to live comfortably, rather than simply moving from one financial crunch to the next, is often found among people in every economic bracket. Those who have known poverty and gone on to better times, like Simon Kronenfeld, understand that developing ways to build financial cushions begins with creating healthy financial habits. Here are five steps that will help you improve your current circumstances and enjoy a greater measure of financial freedom in the future.
Take an Inventory of Where You Stand Today
Every path has to begin somewhere. Your path to financial freedom begins by making an accurate assessment of where you stand today. That means taking into account all of your present financial assets and liabilities.
What you have right this minute forms the foundation of what you can use to make things better. Just as Simon Kronenfeld began his work life as a teen washing dishes, you may be starting out with a job that pays very little. That’s okay, as long as you have plans to move on from that eventually. Being aware of what you have to work with makes it possible to formulate strategies for reaching future goals, much in the way that being realistic about where he was at a young age allowed Simon Kronenfeld to figure out what steps he could take to pursue his dreams.
Pay Off Your Outstanding Debt
Carrying debt, especially unsecured debt, for a long period of time does nothing to help your circumstances. Smaller obligations ultimately become larger ones when you engage in activities such as paying the minimum on credit card balances, or on the account you have set up with the local grocer. Interest and other fees inflate debt more than many people realize.
While you may live with longer-term debt in order to buy a home or make some other major purchase, pay off your debts as quickly as possible. Certainly, it matters in terms of avoiding interest charges, but it also means you have more equity in property that you own, which is a good thing. As people like Simon Kronenfeld will tell you, carrying less debt also makes it easier to sleep at night, and not worry how you will pay this month’s bills.
Develop a Health Understanding of Needs Versus Wants
The line between basic living needs and wants has become blurry for many people. For those like Simon Kronenfeld who started out with little and eventually built a considerable amount of financial security, this is a point that is not lost. In many ways, successful people continue to draw a strong line between what they need and what they want. That makes a big difference when it comes to making a financial decision.
Get into the habit of asking yourself questions before making purchases. People like Simon Kronenfeld are likely to ask themselves if this falls into the category of a basic living need that somehow involves the acquisition of food, clothing, shelter, and transportation. If not, is it a want that will serve a purpose for a reasonable amount of time? Can you envision yourself being just as excited about the purchase a week from now as you are today? These, and similar questions, will help you make more prudent decisions about whether to buy something, or put a few more dollars into some sort of interest-bearing account.
Learn to Live Beneath Your Means
The fact that you bring home a certain amount each month does not mean you have to spend all of it this month. Your goal is to live comfortably but still have some sort of surplus income each month. As people like Simon Kronenfeld will attest, prudent purchasing will help. It can also help to budget in a way that ensures there’s always more money coming in than going out.
To that end, set up a budget that covers all the essentials and allows a little to spend on things you want. The rest gets set aside for things like savings, account deposits, a cushion in the checking account, and acquiring some sort of investment. Living beneath your means now ensures that you have the resources to get through any rough period that may come later.
Create Resources That You Can Call Upon During Emergencies
As part of your financial planning, do include the creation of liquid assets that can be called upon if the need arises. Professionals like Simon Kronenfeld will confirm that business owners build and maintain contingency funds that can be called upon if there’s a dip in collected revenue, or an economic slump that temporarily reduces demand. The same can be done for individuals.
Simon Kronenfeld learned early on that building a cache of liquid assets meant it was possible to take care of things, like repairing the car, or replacing a major appliance, without throwing the household budget into chaos. Money in a savings account may serve as your personal contingency fund. It may be stock holdings and other investments that you could sell if necessary. As long as it’s an asset you can convert into cash quickly, and that will hold or increase in value in the meantime, it’s worth setting aside for this purpose.
There are other strategies to employ along with these five that will help you build and maintain financial freedom. Do as Simon Kronenfeld has done, and learn how to relate them to the way you live your life. Develop healthy financial habits, and the odds of finding yourself facing a major crisis without sufficient resources will be much lower.