It’s time to get ahead of the curve! If you’ve been here before, you’re probably aware that financial literacy is vital to any working adult. So it’s time to put your theory to the test and take some measures to optimize your financial plan. Here are the two essential elements to do that!

Element 1: Increasing your income

You need to know how to increase your income to reach financial freedom sooner. Increasing your income can speed up the time it takes for you to achieve your financial goals. Instead of just reducing your expenses, doing this will help you pay off your debts faster, save more, and invest more. Three steps to increase your income are as follows:

– Focus on growing your wealth via investing

You can immediately start to invest once you’ve set aside a monthly saving goal. Growing your wealth by investing is essential because you can get more money in return. There are many types of investments in terms of risk and potential return. The general rule is that the safer the investment is, the lower the possible return will be, and vice versa. For those unfamiliar with the various types of investments, you can start with the basics, such as stocks or bonds.

– Save more 

You won’t be loaded by simply making money and spending it entirely. It’s essential for you to know how to save more. Let’s start by tracking your spending for at least a month. You can do this by recording your every expenditure, no matter how small, so you know exactly where all your money goes. Then, based on this information, you can make needed adjustments.

– Keep growing, know your worth when it comes to your salary

Indeed, your salary does not define you. However, you have to know your worth regarding your salary because what you bring to the table shouldn’t be overlooked. An employer generally has more budget to spend on your salary than what they’ve initially offered. So, asking for a higher salary is okay if you think you deserve it. Remember that your salary today will impact your life-long earnings, so you better negotiate a higher salary for your next job.

Element 2: Reducing your expenses

Once your income has increased, that doesn’t mean you can make more expenses. On the contrary, you need to reduce expenses to optimize your financial plan. Worry not; you can reduce your expenses by doing the following tips:

– Time to budget

It would be best if you started budgeting because it will help you to feel more in control of your finances. The journey to financial stability starts by tracking expenses and following a budget plan. A budget will put you on a stronger financial footing on a daily basis and in the long term.

– Effective ways to clear your debt as fast as possible

It is also essential to clear your debt as fast as possible because having too many payments every month might get you behind on other financial goals. After making a list of all your debts, figure out the maximum you can pay monthly. You can pick some debt repayment strategies as follows:

  1. The snowball method – You can use this debt repayment strategy by paying the smallest debt as quickly as possible. This method works by paying minimums on all other debt and then paying extra toward the next largest debt. You can boost confidence by doing a quick payoff.
  2. Debt avalanche – This method prioritizes paying the highest interest rate debt. Once you’ve done that, pay minimums on all other debt, then pay extra toward the next smallest debt. This method is good to try since paying off a big debt can boost a feeling of control and get rid of big interest as well.
  3. Debt consolidation – This method combines debts into a single account. To do this, you have to avoid any other debt until post-payoff. Debt consolidation is well-liked because of its possible lower interest, and one account increases focus.

Informed decisions are the way to go. Besides following the two essential elements above, please check our other articles on personal finance to help make your financial goals a reality!