Just like any goal, getting your finances stable and becoming financially successful in the future requires the development of good financial habits.

So if you are looking for ways to improve your future financial success, you have come to the right place. We will provide you with different tips you can implement to achieve your goals.

• 10 Ways to Improve Your Future Financial Success
• How can I be Financially Stable at 20?
• How Long does it take to Become Financially Stable?

10 Ways to Improve Your Future Financial Success

1. Know what you’re saving for

As the author of The 7 Habits of Highly Effective People put it, “begin with the end in mind.” To me, the ultimate goal of saving is to reach financial independence, where you no longer need to work to live comfortably and safely and can spend your time however you like.

Read Also: Financial Habits of Successful People

Have some fun and daydream about what you would do with all that free time. Add in some shorter-term goals along the way like becoming debt free or buying a new car or home.

Finally, writing them down makes them more likely to happen. You may even want to use images and put them somewhere prominent where you can see them and feel motivated. For example, America Saves Week had people make posters of their goals and post them on Facebook or Twitter.

2. Make sure your saving goals are SMART

Once you get past the daydreaming phase, you’ll want your goals to be more concrete. They should be specific, measurable, achievable, realistic, and trackable. For each goal, estimate what it will cost and use this calculator to see how much you would need to save each month to achieve them.

3. Find ways to reduce your expenses

Unless you have ways of earning additional income, this is where the money will come from to fund your goals. The first step is to look at your bank and credit card statements to see where your money is going.

(Programs like Mint and Yodlee MoneyCenter can help you do this online for free.) Then get rid of anything unnecessary or wasteful that you can eliminate or replace.

Some examples would be a gym membership you don’t use or can replace by exercising at home or outdoors, a subscription to a newspaper or magazine you don’t read or can access online, cable channels that you don’t watch or can be replaced, a landline phone made obsolete by your cell phone, a cell phone that can be replaced by a cheaper prepaid plan, and coffee and lunch that you can bring from home instead of buying out.

Finally, see if you can reduce your remaining bills by shopping around or negotiating them down. There’s even a company called Billcutterz that will try to negotiate your bills for you and split the savings 50/50 with you.

4. Create a budget

Yes, the dreaded “b” word. Instead of looking at it as deprivation, think of budgeting as making sure your spending reflects your priorities and values.

After all, we’re bombarded every day by marketing and advertising designed by some of the smartest people on Madison Avenue to convince us that their priorities are ours.

Budgeting allows you to take back control over your money and make sure that your needs (both short and long term) are being fulfilled before your wants.

If necessary, that means weighing each of your remaining expenses against your savings goals and making the conscious decision of what takes priority. You can then make a pledge to save towards your goals with America Saves.

5. Pay yourself first

Once you decide how much you’re going to save for your future goals, the best way to make sure that you actually do it is to set that money aside before you even have a chance to spend it.

Your employer’s retirement plan makes that easy since the contributions are deducted right from your paycheck so it’s a great place to start, especially if your employer offers a match.

You can do the same thing outside of your retirement plan by having the money automatically transferred into a separate savings or investment account.

6. Consider escalating your savings over time

If you can’t save quite enough now, one option is to start with what you can do now and then gradually increase your savings rate over time. Some retirement plans have a contribution rate escalator that allows you to have this done automatically.

This is one of the most powerful ways to build wealth over time. In fact, there’s a book called The Automatic Millionaire that details the stories of ordinary people who were able to became millionaires with this strategy.

7. Stick to the plan

Now that you have less to spend, it’s important that you stick to your spending targets or you could end up accumulating debt. You can track your expenses on a worksheet like this or use tools like Mint, Yodlee MoneyCenter, and Personal Capital to monitor your spending online for free.

Some sites will even alert you if you start overspending in a category. If you don’t want to count every nickel and dime, another approach is to give yourself a fixed weekly monthly allowance in a separate checking account or even in physical cash to be used for discretionary expenses like shopping, food, and entertainment.

The key is that when the money is gone, it’s gone until the next week or month.

8. Educate yourself

Do you know what an IRA is? What is the sales tax rate in your state? How often do you expect bank statements; do you know what all of the terms on your statement mean?

You can’t make sound financial decisions if you don’t know anything about finances, so take the time to pick up the phone and call your bank, grab a book from the library or spend some time online regularly furthering your financial education.

9. Watch what you put in your mouth

Do you know the price at each of your local stores for the groceries you most often purchase? No? Time for a field trip! Your household’s grocery bill is a large, recurrent expense that can easily be chipped away at with smart shopping.

Remember to Google and print coupons before you go, read those sale circulars you get in the mail before you toss them away, and consider warehouse stores or online merchants for goods with a longer shelf life.

Food thrown away is money dumped right from your wallet into the trash, so shop as often as you need to.

10. Eliminate and avoid debt

If you’ve got credit cards, personal loans, or other such debt, you need to start a debt elimination plan. List out your debts and arrange them in order from smallest balance at the top to largest at the bottom.

Then focus on the debt at the top, putting as much as you can into it, even if it’s just $40-50 extra (more would be better). When that amount is paid off, celebrate!

Then take the total amount you were paying (say $70 minimum payment plus the $50 extra for a total of $120) and add that to the minimum payment of the next largest debt.

Continue this process, with your extra amount snowballing as you go along, until you pay off all your debts. This could take several years, but it’s a very rewarding process, and very necessary.

How can I be Financially Stable at 20?

The sooner you start making a financial plan for yourself, the brighter your future will be. “Building habits, especially in your twenties, is so important for long-term success,” says John Deyeso, a financial planner in New York City, who works with a lot of younger people (and is 37 years old himself).

Here are the ten things you should do in your twenties to take control of your finances:

1. Develop a marketable skill

Before you can start worrying about what to do with your money, you need to earn some.

Think in terms of your career, not just a job. Because let’s face it: You’re probably not going to love your first job, and it won’t be your last job. But you should try to make the best of it. 

Don’t be afraid to experiment. “You may need to take risks when you’re younger,” says Erin Baehr, a financial planner in Stroudsburg, Pa., and author of Growing Up and Saving Up. “You may take one job over another and find it doesn’t work out. But when you’re younger, you have the ability to do that. And then that can parlay into a bigger return down the road.”

2. Establish a budget

Once you’re bringing home the bacon, you’ll have to figure out how to slice it up. Without a budget, you risk overspending on discretionary items and undersaving for important big-ticket purchases.

“The big thing is really to differentiate between your needs, your wants and your dreams,” says Lauren Locker, a financial planner in Little Falls, N.J., who also teaches a personal finance course to undergraduate students at William Paterson University.

First, layout all your daily expenses (such as commuting costs and food bills) and recurring monthly payments (rent, utilities, debts). When you know where all your money is going, you can more easily see how to cut costs.

Next, factor in your short- and long-term savings goals, such as an emergency fund and retirement kitty. And if you ever expect to settle down and buy a house, you should probably start saving for the down payment as soon as possible.

A budgeting site such as Mint.com can be a big help if you want to digitize your budget.

3. Get insured

Mayhem truly is everywhere, and as an adult, you are responsible for protecting yourself and all your stuff from it. When horrible things happen to you—say, a trip to the emergency room or a fire in your apartment—insurance may save you from shelling out thousands of dollars all at once.

4. Make a debt-repayment plan

Debt is a reality for most young adults. But letting it linger—or, worse, grow—can set you back for years to come in the form of greater interest payments and lower credit scores.

For your student loans, be sure you have a good repayment plan in place—see Strategies for Repaying Student Loans—and consider some programs that can help reduce the burden, such as the Peace Corps or Americorps. A much easier way to trim this cost is to set up automatic payments for your federal student loans; doing so cuts 0.25% off your interest rate.

Work out a plan to tackle your credit card debt, too. Hopefully, being so young, you haven’t had time to bury yourself in much. But if you’ve been quick on the swipe, your first step is to establish a budget and rein in your spending. You should then start paying down debt on your highest-rate cards first.

5. Build an emergency fund

Insurance alone won’t cover all of your problems. You still need to have liquid savings on hand as an added precaution.

Some call it a rainy day fund. I think of mine as a polar vortex fund. This past frigid winter, my house’s heat pump gave up. A new HVAC unit cost me and my husband about $4,000. Home insurance was no help, but our emergency fund saved us from going into debt to cover the replacement or asking our parents for the money.

We recommend stashing enough to pay three to six months’ worth of expenses in a safe and easy-to-access savings account. Contributing to your fund should be a top priority in your budget. Aim to sock away at least 10% of each paycheck until you reach your goal, and add a boost any time you luck into some extra income, such as a bonus or birthday gift.

6. Start saving for retirement

Retirement seems like forever from now. But it’s more important than ever for us to focus on this savings goal as soon as possible. “Our generation, the twenty- and thirtysomethings, maybe the first to have to save for retirement for as long as your work career,” says Deyeso.

The sooner you start saving, the better. Because of the magic of compounding, time will fatten up your retirement kitty. For example, if a 25-year-old saves just $100 a month, assuming an 8% return and quarterly compounding, she’ll have $346,039 by the time she turns 65.

Don’t think of saving for retirement as subtracting money from your paycheck or checking account. Rather, consider them automatic payments to your future self.

If you participate in your company’s 401(k)—as you should—your contribution can be automatically deducted from each paycheck before taxes. If you have a Roth IRA, you can set up automatic transfers through your bank or brokerage. “It hurts at first, but people adapt,” says Deyeso. “That money gets forgotten about.”

7. Build up your credit history

You’ll need to take on some debt (“having no credit is as bad as having bad credit,” says Locker) and show that you know how to manage it well in order to build up your credit history and earn a good credit score. This number, along with the credit report on which it’s based, is the key to many milestones in your financial life. 

A good score means lower rates on credit cards and loans. Landlords may consider your score before offering you a lease. And employers might take a look at your credit report during the hiring process.

Unfortunately, because you’re young, you’re at a disadvantage. The length of your credit history counts for 10% of your FICO score, the most widely used model. But a lot of your score, 35%, depends on your payment history. So you can easily raise your financial grade by paying all your bills on time.

Another 30% of your score is based on how much you owe, calculated as a percentage of your available credit. In other words, maxing out your credit card every month is bad, even if you always pay off the entire balance. Be sure to use your card sparingly. “FICO high achievers,” who score at least 750 on a scale of 300 to 850, typically use just 7% of their available credit.

8. Quit the Bank of Mom and Dad

You love your parents, and what better way to show them than to set them free of your financial responsibilities? “In your twenties, the main goal is becoming self-sufficient,” says Baehr. “Look to get off of your parents’ payroll and onto your own.”

Obviously, financial independence starts with a job. You also ought to cut the cord by getting your own insurance, car, cell-phone plan, home, everything. Slightly less obvious, you don’t want to resort to getting help from Mom and Dad even in a pinch—hence, the need for an emergency fund.

Of course, all of this is easier said than done. If you do need financial assistance from your parents, approach them maturely and responsibly.

9. Clean up your online presence

Time to put down the red cups, folks, or at least scrub them from your public image. Like it or not, your social media activity is viewable by the entire Web-surfing world, including all your current or potential employers. Get your digital act together by searching for yourself online.

Check Spokeo.com and Pipl.com, as well as the obvious Google, to see what’s already out there, and double-check your privacy settings on Facebook, Instagram and other networks to make sure you’re not adding to the mix unintentionally.

Add to your positive persona by pumping up the good stuff in cyberspace. For example, your LinkedIn account should be a glowing representation of your professional potential. And if you’re an expert on a certain subject, you can show off your knowledge via Twitter, Tumblr, WordPress or other sites.

10. Get your key financial documents in order

You—not your parents—should have your birth certificate, Social Security card and other official IDs in your possession. Also keep a list of all your banking and investment accounts, household bills and insurance policies, along with any online usernames and passwords.

Be sure to get details on any funds your parents might have administered for you, such as custodial accounts, as well as any lingering savings bonds.

Store all this important information in a secure place, such as an actual safe, and make sure someone you trust knows where it’s located. Other documents you might need to keep in mind: your apartment lease, roommate agreement, and car registration and title

How Long does it take to Become Financially Stable?

Financial independence comes from two factors— having (1) enough assets to support (2) your expenses. Most of us would prefer to focus on the first factor. We’d like to get our assets by earning a high salary (ideally for very little work), being a brilliant investor, or inheriting a windfall. (Or “Plan D”: winning the lottery.)

Unfortunately, it can be extraordinarily difficult to rapidly raise your income to build up enough assets to achieve financial independence in a short time. The harsh reality is that materialistic consumers will have to work for decades to gather enough assets to support their expenses.

It’s easier to focus on the second factor by reducing expenses. Notice that it’s “easier” to reduce expenses, not necessarily “painless”. Every hopeful retiree is eventually forced to choose the values that are most important to them: either working for decades to afford an affluent lifestyle with high expenses, or reducing their lifestyle to minimize their working years.

You have to find the right work/life balance that’s acceptable to you and your family. You’re frugal if your values match your spending and you’re feeling good about your retirement goals.

You’ve crossed the line to deprivation if you’re miserable and stressed out every day, struggling against all sorts of material temptations while trying to pile up enough assets to stop working. Refer to the related posts at the end for more details on drawing the line between frugality and deprivation.

How Much Will You Need To Be Financially Independent?

While some of us will struggle for years with the frugality/deprivation line, others will want to revisit that issue after finding the answer to the next question: how much will you need? For this analysis we’re going to assume that the Trinity Study’s 4% is a safe withdrawal rate.

That study assumes you spend 4% of your retirement portfolio during the first year and raise the amount for inflation every succeeding year. Dozens of studies have clustered around SWRs of 2-6% using various assumptions and other complicated withdrawal schemes, but most of the studies agree that 4% is probably safe enough.

Most new retirees will boost the “safe enough” assessment to “100% success” by keeping an eye on spending through the retirement years and not blindly raising it every year for inflation.

Some will spend 4% of their portfolio every year and never raise it for inflation while hoping that their portfolio will grow faster than inflation. Others will work for “just one more year” to pad their portfolios with a safety factor.

Others might even decide to go back to work for a few months during recessions to help their retirement portfolio recover. The odds of a 4% SWR failure are very low, and for the rest of this post we’re going to assume that you’ll be able to see problems coming soon enough (and slowly enough) to avoid them.

Once your assets are 25x your expenses then you’re financially independent and able to retire at any time. It bears repeating that before you can solve this equation, you have to track your expenses and develop a realistic retirement spending budget.

How Long Will it Take to Become Financially Independent?

Once everyone has determined how much they’ll need, the next question is how quickly they can get there. Again we’re going to focus on reducing expenses (and on saving more money) rather than raising income.

Military members will see their pay rise with longevity and promotions, but the forecasts on when that will occur (and for how much money) can rapidly deteriorate into wishful thinking instead of a realistic career timeline. We’ll get back to these pay raise/promotion issues after we look at the math.

Let’s add another simplifying assumption: constant savings.

We’ll assume that your income and expenses will remain at about the same ratio for the time it takes you to achieve financial independence. Realistically the time to accumulate enough savings will be a matter of 5-10 years, although a few will take longer.

There will probably be at least one pay raise and promotion during those years, so the assumption makes the savings math a lot easier while keeping a practical forecast.

Let’s start with an extreme case. Jacob Lund Fisker, the owner of the EarlyRetirementExtreme.org website, has managed to achieve financial independence through saving as much as 80% of his income. Yes, that’s extreme.

But yes, it’s achievable and sustainable if your values include achieving financial independence in your 30s. You’ll have to read his blog (and his book!) to figure out how he did it (and to decide whether you’re willing to do it) but let’s start with that 80% number.

If you earn $1000/year and save 80% of it, or $800/year, that means your expenses are $200/year. Achieving assets of 25 x expenses requires 25 x $200 = $5000. Savings are $800/year, so the time to financial independence is $5000 / ($800/year) = 6.25 years.

In the real world those savings would be invested in a balanced portfolio of equities, bonds, and cash that would (over the long term) compound by at least the rate of inflation. Six years of compounding may accelerate the retirement date by a few months but that depends on the portfolio’s specific asset allocation, its volatility, and the annual performance.

At this point most of the readers are probably still stuck a couple paragraphs back at that 80% savings rate. Maybe 80% is too extreme to be realistic for most. Let’s try a number at the other end of the bell curve.

Most financial advisers (and the popular financial media) encourage new investors to save at least 15% of their income. The assumption is that a new worker, fresh out of school and starting an independent life, will struggle to save even 15% of their income as they accumulate a wardrobe of office attire, transportation, living quarters, and furnishings (let alone a family).

Another assumption behind the 15% sound bite is that a worker’s savings rate will accelerate as their income rises with their careers, and they’ll save a much higher percentage of their income when they’re in their 50s and 60s. The 15% number is chosen by the media to encourage their young readers while admonishing them to save more as soon as they’re able.

Unfortunately, a 15% savings rate means they’re going to be working a long time. Saving $150/year with expenses of $850/year means that assets = 25 x $850 = $21,250. Time to financial independence becomes $21,250 / ($150/year) = 142 years. That can’t be right, can it?

Luckily the actual answer turns out to be “only” 43 years. The reason for the difference is that each previous year’s savings is compounding as a new year’s savings is added to the portfolio. The 80% saver was only saving for six years, and compounding wasn’t a very significant factor during that short time period.

For the 15% saver, over their decades of working years the compounding becomes significant enough that the portfolio begins to grow exponentially. Notice, however, that 43 years is also the amount of time that most people will be in the workforce to retire in their 60s.

Before we bring out the math and the results tables, let’s review the simplifying assumptions behind the numbers:

• A constant savings rate, even though most military will have longevity pay raises and promotions along with occasional periods of tax-free combat pay. Bonuses are, well, just bonus!
• A single income earner, although a working spouse can greatly improve the savings rate.
• Constant expenses, even though expenses can vary from one year to the next and will generally drop as frugality skills improve. Expenses in a combat zone are even lower because that’s deprivation.
• A conservative rate of return of 5-6% per year, even though investment allocations will be in a high-equity portfolio (stock index funds) with very low expenses (the TSP).
• A safe withdrawal rate of 4% rising every year for inflation, even though a recession would cause most retirees to cut spending or work part time.
• No pension, no Social Security, no Medicare. This calculation assumes that you’re doing it all on your own investments and your own health insurance. I’m not going to get into the politics but I’ll confidently forecast that some form of Social Security and Medicare will still be making a difference even for those readers who are currently teenagers.

The math behind the savings and compounding is a more complicated exponential formula for determining the future value of a series of payments:

Assets = Expenses * 25

= (Savings rate) * [(1 + compounding rate)^^Time – 1] / (compounding rate)

The compounding rate is the rate of return on the investment portfolio. A realistic value is about 5%-6%/year depending on the asset allocation and the length of time that the assets are invested.

Assuming a 5%-6% compounding rate means that the equation can be solved for the length of time required for various savings rates.

Read Also: 11 Secrets That Make an Online Business Successful

More aggressive 60-70% savings rates, especially with a working spouse, will cut the time to financial independence to a decade even without a pay raise. Service members are earning annual pay raises, longevity pay raises, promotions, and several other boosts to their income. Even as few as two service obligations (a total of 8-12 years) will see significant pay increases as well as large savings rates during deployments.

Final Thought

The great thing about these ways to achieve greater financial success is they’re easy and anyone can do them. You don’t have to guess about the future or take big risks with your money. All you have to do is make a plan and follow through.