Introduction
Have you ever felt like you’re not where you want to be financially? Do you ever feel like everyone else has their finances figured out while you’re just trying to keep up? Maybe you’re watching friends buy homes, start businesses, or invest in stocks, and you’re left wondering if you’re falling behind financially.
First, feeling financially behind is something almost all of us experience. You could be a young professional or someone who’s built a seven-figure portfolio, that nagging feeling can hit at any time. What you have to remember is that financial security isn’t a race, it’s a marathon, so there’s no single finish line. But if you are feeling behind, then let’s look at a few actions you can do today to get back on track and move forward with confidence.
Audit Your Financial Picture
Most people track their financial progress by how much cash they have in their checking account. And if that balance isn’t growing, panic can start to creep in, but your checking account isn’t the only thing that shows progress. It’s impossible to know where you’re going if you don’t know where you’re starting from, so you have to take an honest look at your current financial situation. This isn’t just income, but also expenses, debts, assets, and liabilities. This step may feel uncomfortable, but it’s a crucial and necessary step.
Set Realistic Short-Term Goals
We’re often so focused on long-term dreams that we forget the value of short-term wins. Short-term financial goals, like saving $1,000 in an emergency fund, can help you build momentum and confidence. One of the hardest parts of managing your finances isn’t necessarily figuring out what to do; it’s sticking with those smart decisions consistently over a long period of time, we’re talking decades. So, setting smaller milestones keeps you focused and motivated.
Start Investing, No Matter How Small
One of the biggest myths about investing is that you need a lot of money to start. The truth is, even small, consistent investments can grow over time. Compound interest can be your best friend if you start right now. You just have to remember to increase those contributions as time goes on. An easy way to do this is to set up automatic contributions. Doing this removes the decision making from you in the moment. Instead, you build the habit of living without those dollars all while they’re automatically saved or invested to protect your financial future.
Now, maybe you’re sitting there thinking, ‘But I still have debt,’ or ‘I haven’t even started saving for retirement yet.’ Or maybe you don’t have anything set aside for emergencies. Before we talk about what you can do, realize that you’re not alone. In a recent Capital One survey, 3 out of 4 people, nearly 77%, reported feeling anxious about their financial situation. And these worries covered a range of concerns from buying a home to affording a child’s education.
We all want to live without the constant worry of money, but it’s tough because prices have risen nearly 30% in just the past few years. That’s an extra $300 for every $1,000 you used to spend on the same things. And that’s not even mentioning the cost of housing and college. So, yeah, it’s no surprise that most people are caught in this cycle of sticker shock, stagnant wages, and feeling they’re financially behind.
Reevaluate Your Budget and Spending Habits
If you feel like you’re falling short financially, it might be a sign that your spending and saving aren’t aligned with where you want to go. If you’ve taken the action step to gather up all of your income and expenses, it’s time to take a deeper look at how you’re prioritizing your spending. Start by identifying your fixed costs. Things like rent, utilities, and other essentials that change less rapidly. Generally, you won’t be able to get rid of these costs entirely, but could you reduce them? If you have available rooms, could you rent the space out to decrease your housing expense? Do you have storage space that you could rent out?
In addition to trimming those fixed monthly costs, take a closer look at your discretionary spending. How much are you spending on eating out, entertainment, and subscriptions? Can you reduce, pause, or even cut certain spending? These adjustments will help give you a bit of breathing room and more control over your cash flow.
These changes don’t mean you have to cut out everything fun in your life, but cutting back—especially on discretionary items like dining out or shopping—can make a huge difference, even if it’s just temporary. No one wants to feel restricted, but managing your money is about choices and tradeoffs. Do you make your lunch at home, or do you keep spending on take-out? Do you drive a new car or hang on with your beat up used one? These decisions may seem small in the moment, but they truly add up over time. The more intentional you are over these choices, the less you’ll feel like you’re falling behind.
Prioritize Paying Off Debt
There’s nothing that can make you feel more anxious than having the weight of debt on your shoulders. It feels like a never-ending cycle and bottomless pit stealing your hard earned dollars, but with the right plan, you can get back on track. The first thing we recommend is to focus on paying down your highest-interest-rate debt. This is often things like credit card debt, which can carry interest rates anywhere from 15% to 30%. That’s a massive amount of interest that can eat into your finances.
And while you’re working on paying down your debt, do your best to avoid taking any more. With the rising cost of living, it can be tempting to swipe that credit card, but you’ve got to stick to spending what you can afford to pay off at the end of each month. Becoming debt-free might seem like a long road, but every payment you make gets you one step closer to financial freedom. And once you’re debt free, you’ll have more room to breathe, more room to invest, and—most importantly—you’ll be more confident of your progress and feel less behind financially.
Build Up That Emergency Fund
Emergencies will happen to all of us at some point. Whether it’s a job loss, a medical event, or a car repair that comes out of nowhere, life has a way of surprising people. And because we can’t predict when or what those surprises will be, the best thing we can do is prepare. Build a solid financial safety net that will catch you when life throws a curveball.
Having an emergency fund gives you peace of mind. You won’t have to dive into debt to cover unexpected expenses. It puts you in control—financially and mentally. The kind of control that gives you confidence and assurance that you’re not as far behind as you may think. It’s generally recommended to save up at least six months’ worth of expenses, but that can be an incredibly large number, so remember those small milestones we talked about earlier. Start with saving up 1 month’s worth of expenses. Focus only on getting that month saved up, then you can set the next milestone goal.
Saving for Retirement ASAP
Even if you haven’t saved a dime yet, thanks to compounding interest you can still build wealth. Even if you’re in your 40s and 50s, saving and investing can still work for you, You might feel like you’re behind where you expected to be, or maybe you’re comparing yourself to someone else, but those expectations aren’t tangible—your dollars are. With compounding interest, every dollar you invest today can start working for you, growing over time.
If you’ve got access to an employer sponsored retirement account, start investing in it. If they offer a match, ensure you’re contributing enough to get the full employer match. If your company doesn’t offer that account, consider something like an Individual Retirement Account. When you first start investing, it might not seem like your contributions are making much of a difference, but you’ll be glad you started.
Look for Ways To Earn More Money
You should be reviewing your income once every year. You need to make sure you’re earning enough. And the more informed you are, the better chance you have of making more. Remember, there is no cap on the amount of money you can make. Having a second stream of income might just be what you need. The truth is, for some people, feeling financially behind is literally about not having enough money.
Consider taking on a side hustle; something like this would allow you to work around your current schedule with more flexibility. Do you have a skillset that you can freelance? Do you have time to drive for a rideshare service? Or can you sell products online? The more you can earn and not spend, the quicker you’ll get ahead and the less stressed you’ll find yourself. Soon you’ll realize you don’t worry so much about the groceries or the price of gas to put in your car.
With enough consistency, you’ll pay off those high interest debts and get invested in high yield savings, retirement, and brokerage accounts. You might even realize that you’re enjoying a simpler life, as your priorities shift. And you realize you’re not as far behind as you’ve thought.
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