Step #2: Clean Up Your Finances
Once you start learning how to manage money, you may realize you’ve made some mistakes with your finances in the past. That’s okay! But if you want to be financially independent, you have to clean up the mess before you can start building wealth.
That means if you have debt like credit cards, student loans or car loans, it’s time to get serious about kicking it to the curb.
Why? Because while you owe money, your paychecks have someone else’s name on them. If you want to reach your goal, you need your full income at your disposal, not bits and pieces that are left over after paying credit card bills and student loan payments.
Paying off your debt helps you lay a foundation to build wealth that will last. Make sure you have $1,000 saved before you start tackling your debt. You don’t want an unexpected expense to derail your progress!
Most people feel like they got a raise when they start budgeting, so that’s good news for you. Throw all of that extra at your smallest debt until it’s gone. Then keep the snowball rolling! Paying off debt is hard work, but there’s nothing like the feeling of actually keeping the money you bring in every month!
Once you’re debt-free, stay there. For good. Having debt undermines your ability to build wealth and puts your financial plan at risk. It’s simple. Steer clear of debt!