How are your finances looking up?

Wait, seriously, who asks that question in 2020? The COVID-19 pandemic came, killed thousands, and rendered millions of people out of employment. You know things have hit the fan when close to 50 million Americans have filed for unemployment benefits.

The pandemic will clear eventually, but how about your financial situation? It isn’t going to get better magically. You have to put in the work that will set you on the path to financial freedom.

In this article, we’re telling you what you can do to turn around your finances as soon as possible

1. Take Stock of Your Current Financial Situation

Your goal is to improve your finances, right?

For that to happen, you need to know where you’re right now. It’s like setting on a journey. To know how far you’re from your destination, you need to know your current location.

As such, start by calculating your net worth. Don’t worry, net worth isn’t a term reserved for just the rich.

So, how do you do this?

Simple. Establish your assets, as well as your liabilities.

Your assets could be tangible, like cars, real estate property, and cash, and intangible, such as intellectual property. Your liabilities are your debts, things like mortgages, car loans, and student loans.

There’s a simpler way to do things, though.

Take a look at your income versus your expenditures. How much is left from your paycheck after you’ve paid off all your bills and met living expenses?

If you’ve only a little amount left, then you have two options. Either increase your income or reduce your expenses. We’ll get more into these options shortly.  

But if it’s any consolation, you’re not alone. The vast majority of American workers were living paycheck to paycheck even before the COVID-19 pandemic hit.

2. Draw Realistic Financials Goals

Now that you know where you’re financially, it’s time to decide where you want your finances to be.

Bear in mind that improving your finances is a broad goal. Almost everyone is in a quest to improve their finances. You need to break down this improvement into a tangible goal.

For instance, an ideal goal is to be able to save say $2,000 every month. After a year of consistent saving, you will have about $24,000, which is a good amount to have in a rainy-day fund. Whichever way you look at it, there’s no doubt your finances would have improved.

Or, your goal could be to start investing. A good investment can yield positive returns, which will automatically improve your financial situation.

Another goal could be to cut your expenses. Perhaps you’re burning through about $5,000 every month in bills and living expenses. So, you might want to cut down your expenses to about $3,500.

Whatever your goal is, ensure it’s realistic.

3. Increase Your Income

If you’re like most people, you probably don’t like your current financial situation because your income isn’t enough to take care of your needs.

What if your employer doubled your income? Just like that, most of your financial problems would be over.

Unfortunately, there’s no chance your employer is going to double your income, especially considering the rough year businesses have had in 2020. You could earn a slight increment, but that won’t do anything for your troubles.

You have to find real ways to increase your income substantially. If you have one job, perhaps now is the best time to pick up a second or even a third. With multiple streams of income, you’ll move closer to your financial goals, as long as your expenses don’t rise with your rising income.

There are other options that couldn’t potentially increase your income, such as starting a small business, but you need to understand the risks involved. Plus, you need adequate capital to make such an investment.

4. Cut Your Expenses

Truth be told, increasing your income in this economy is easier said than done.

This is why cutting your expenses substantially is the easier path to improving your financial situation. A lot of workers are living paycheck to paycheck not because they’re being underpaid, but because they’re living well over their means.

Don’t be like these people.

Cutting your expenses requires dedication. You need to keep your eyes fixed on the bigger goal; otherwise, it’s easy to lose your focus and give up.

To cut your expenses, start by renting a cheaper house. Moving from a house where you pay $2,500 a month to a $2K house, for instance, will make a big difference. The $500 you’ve saved can go into your savings account or even offset another bill, such as a health insurance premium.

There are also minor changes that will have a big impact. Something like canceling your multiple online streaming subscriptions, and reducing your spending on fast food, movie tickets, road trips, and other luxuries. You might not see the impact at first, but over the course of several months, the savings will add up.

5. Buy Health Insurance

Healthcare bills are the top reason Americans file for individual bankruptcy.

To avoid this from happening to you, purchase adequate health insurance. If you’re on an employer-sponsored plan, well and good. But if you’re self-employed, don’t skip buying a health insurance plan. It could save you from paying a $5,000 bill out-of-pocket when you need healthcare.

6. Invest, Invest, Invest

As your financial situation starts to improve, start investing.

By this time, hopefully, you’ve some money saved up, which you can use as investment capital. You could invest in stocks, real estate, precious metals, and/or bonds. Just be sure to get professional advice before getting started as an investor.

You Can Improve Your Financial Situation Quickly

Your current financial situation isn’t cast in stone. You can turn it around, as long as you have the will and a proper strategy. With this guide, you now know what you can do to improve your finances.

All the best and keep reading our blog for more money tips and advice.