Achieving financial freedom is really about setting big goals and going after them. But these goals can sometimes seem overwhelming. Saving enough for retirement, a new home, or a college degree is a big task. Eliminating debt can also feel impossible.
That’s why it helps to set smaller, more manageable goals and work from there. You won’t save all of your retirement nest egg or pay off all of your credit cards tomorrow, but there are steps you can take to build your confidence and get you on your way. Here are some achievable financial milestones that you can go after.
1. Open a retirement account
Just open the account. You don’t even have to invest more than the minimum: Simply take that first step and open your 401(k) or individual retirement account. By checking this off your list, you have removed a big mental hurdle from investing, and you may even begin getting matching contributions from your employer even if you are not contributing much yourself.
With the accounts open, you’ll be able to begin putting more sizable chunks of money aside and buying stocks and mutual funds when you feel you are ready. But if your accounts aren’t open to begin with, you might talk yourself out of getting started. (See also: 5 Retirement Accounts You Don’t Need a Ton of Money to Open)
2. Be independent
Do you still rely on your parents or other friends and family for financial help? Do they assist you with rent payments, credit card bills, and other expenses? Getting help from others isn’t a bad thing, but there comes a time when a young person must learn how to maintain financial independence.
This means being able to live on your own, pay your bills, and avoid debt without seeking “loans” from the Bank of Mom and Dad. This is not always easy, especially in an era when many young people have student loan debt — but this should be a goal for anyone in their 20s. (See also: 11 Money Habits That Make You Look Financially Immature)
3. Reduce your credit card debt
Ideally, you want to pay off the whole credit card balance as soon as possible. But for some of us, we just want to keep the balance from growing. Sometimes, we’re stuck in a spiral of making minimum payments, while interest charges are adding to the debt. You may not be able to get rid of your credit card balance overnight, but you can take a big step toward that goal by simply reducing the balance the next time your bill is due.
This will mean paying substantially more than the minimum required to make a real dent into the principal. If you can do this once, you’ll prove to yourself it’s possible to reduce your debt burden and eventually get rid of it entirely. (See also: The Fastest Way to Pay Off $10,000 in Credit Card Debt)
4. Get your credit score over 700
Many people have trouble getting ahead financially because they are saddled with a bad credit score. A low credit score makes it hard to get favorable rates on loans, and can lead to a spiral of debt that’s hard to escape. The good news is that you can fix your credit score over time by making the right financial choices, and your bad finances of the past don’t have to burden you forever.
A credit score of 700 is considered “good” by most credit bureaus. To get there, you need to pay your bills on time and try to pay off all balances in full. If you have missed payments, get current as soon as possible. You don’t want to close your credit cards after paying them off, as this can lower your percentage of available credit and ding your credit score. But you should avoid the temptation to open new cards, as that only increases your potential for adding debt. Your credit score may take time to rise, but hitting 700 is achievable if you make the right moves. (See also: 5 Ways to Improve Your Credit Score Fast)
5. Earn $1,000 in passive income
One of the great ways to give yourself some financial breathing room is to get revenue from sources that don’t require a lot of work. This could mean purchasing dividend stocks, in which companies pay out portions of their earnings each quarter to shareholders. It might mean buying and renting out properties, licensing your creative works, or building a website that generates some ad revenue. Passive income may require some work and expense up front, but could provide you with a solid amount of extra cash without extra effort over time.
Try to earn a spare $1,000 in the next year. Then try and boost that figure. Before you know it, proceeds from these passive sources could be a significant total of your overall income. (See also: 5 Ways to Make Passive Income Online)
6. Save $100 in a month
When your income is barely covering your living expenses, it may seem impossible to save even a few bucks a month, let alone $100. But most people should be able to hit that $100 milestone by taking a good look at their spending.
Begin by tracking your spending in a detailed way, making a note of where every dollar goes. Then categorize your spending. You might have a category for eating out, and another for gas or kids’ activities. By examining your spending this way, you will likely find areas where you can cut costs. You may have to make some hard choices, but they will be worthwhile. A few dollars here and there can add up to $100 or more. And $100 a month can add up to thousands of dollars over time.