How to Go From Financially Average to Financially Killing It

When it comes to your finances, are you content with being average? GOBankingRates found through survey research that the typical American’s finances aren’t in great shape. You probably don’t want to settle for being like most people when it comes to managing your money.

Instead, aim for being a financial superstar. It sounds like a tall order, considering that personal finance and money management can seem so confusing. But it’s not nearly as hard as it might seem.

Click through to learn how you can go from financially average to financially killing it.

If you’re not financially literate, you’re not alone. A GOBankingRates survey found that one-third of Americans don’t know basic finance terms. So your first step on the road from financially average to financially killing it should be increasing your financial literacy.

“The good news is there are a ton of resources for people just like this,” said Mathu Mathu, assistant vice president of operations for Navy Federal Financial Group. “It can start with a simple search online, or a visit to a [bank] branch to speak with an advisor.” Most importantly, educate yourself on your own financial situation by tracking your spending, creating a budget and finding ways to save for your future.

The median wage in the United States is $30,533, according to the Social Security Administration. If your salary is close to that, you’re probably thinking you need to earn more if you want your finances to go from average to awesome. Start by setting career and financial goals you can actually achieve.

To boost your salary, ask for a raise. But make sure you know what you’re asking for and why you deserve it, said executive coach and career strategist Elizabeth Koraca. Research what others in your position are earning on websites such as Salary.com and Glassdoor.

“This will give you more insight on how much your experience and skills are worth and will give you leverage when negotiating a raise,” Koraca said. Then let your boss know what you’ve accomplished by showing what goals you’ve achieved and presenting positive feedback from management, coworkers, clients and customers, she said.

“If it doesn’t look like a raise is in your future, look for open positions that pay more in other departments,” Koraca said. “Or perhaps it’s time to change companies to one that will pay you more.”

In an analysis of student loan debt across America, GOBankingRates reported that the average amount owed by students who graduated with debt was $30,100. So if you’re average when it comes to student loans, you’re carrying a pretty heavy debt load.

To tackle your student loan debt, consider getting a second job and putting all of that extra money toward what you owe, said Mike McGrath, a vice president with EP Wealth Advisors in Valencia, Calif. If you have private loans, you might be able to refinance your loans with a company such as SoFi at a lower interest rate and reduce your monthly payments, he said. If you have federal student loans and are struggling to keep up with payments, visit StudentAid.ed.gov to see if you qualify for income-driven repayment plans that might reduce your monthly payment amount.

If you or your child has yet to start college, avoid racking up a lot of student loan debt by starting at a lower-cost community college then transferring to a four-year public university, McGrath said. Or you could get your degree online at a much lower cost than going to college, which McGrath said his son has done. “He has no college debt,” McGrath said.

You’re certainly not alone if you owe money on credit cards. A GOBankingRates survey found that half of Americans have credit card debt. But that doesn’t mean you should resign yourself to a lifetime of credit card debt.

The first thing to do to dig out of debt is to avoid racking up more. “One way to do this is to start using a debit card,” Mathu said. “You may be less prone to spending if you know the money is coming from your checking account, and you’ll avoid adding to your already existing credit debt.”

Then, pay double to triple the minimum payment due on your credit card debt. “Try to make larger payments, since this pays down your balance faster and can potentially save you hundreds or thousands of dollars in interest,” said Andrea Woroch, consumer finance expert with online lender Marcus by Goldman Sachs. Another option to reduce the amount of interest you pay is to consolidate credit card debt into a low-interest personal loan, she said. You can get a personal loan from banks, credit unions and online lenders such as Marcus.

According to the IRS, more than 70 percent of taxpayers will get a refund his year. The question is how best to spend that money.

GOBankingRates found that 43 percent of Americans plan to put their refund in savings. That’s certainly a good idea. But McGrath said that if you have credit card debt or student loan debt, put your refund toward that first. Then use a refund to build an emergency fund. Finally, if you’ve covered those bases, invest the money for the long-term.

Many people aren’t doing a good job of saving for retirement. GOBankingRates found that 42 percent of Americans could retire broke because they have less than $10,000 saved.

If you want to avoid being part of that statistic, start saving in a 401k, IRA or similar retirement account as soon as possible. “When you start saving matters more than how much you can save,” said Kevin Avent, managing director of wealth management at Unified Trust Company in Lexington, Ky. “A saver who begins early in her 20s and only invests for 10 years can accumulate more wealth than one who doesn’t begin until her mid to late 30s and saves for 30 years.”

You should save 12 percent to 15 percent of your income annually to have enough to replace 70 percent to 80 percent of your income in retirement, Avent said. When picking investments for your retirement account, the majority should be stocks or stock funds. “Don’t make the mistake of being too risk-averse in your 20s, 30s, and 40s with your retirement account,” Avent said. Otherwise, your investments won’t grow enough to give you the nest egg you need.

You don’t want to be like the 39 percent of Americans who don’t know what source of income they’ll rely on in retirement. You need a plan.

“Ideally, your primary source of retirement income will come from a tax-advantaged plan such as an IRA, 401k or TSP for those in the military,” Mathu said. Also factor in Social Security benefits. But Mathu said you don’t want to rely solely on this source of income because Social Security might change in the future if Congress doesn’t act to deal with a shortfall in funding for the program.

You might also want to count on working part-time for retirement income. Or you could reduce the amount of money you need in retirement by downsizing to a smaller home or retiring to a cheap place to live, Mathu said.

Not surprisingly, the biggest source of debt for most Americans is mortgage debt, a GOBankingRates survey found. Having mortgage debt isn’t a bad thing — unless you are struggling to make monthly payments.

If you’re in that position, Avent recommends analyzing your monthly spending and creating a budget to eliminate unnecessary costs so it won’t be a stretch to cover your mortgage payments. Also find ways to make more money. If the debt still is too much to handle, “consider selling the home to find a residence that is more affordable to your income or perhaps renting and paying less monthly,” Avent said.

GOBankingRates found that more than half of Americans expect to retire later than age 65. However, working longer isn’t necessarily a bad thing, McGrath said. “What is this idea that we have to check out at 65 and live the next 30 years playing golf and collecting seashells?” he said.

McGrath said he knows many people who became bored after they retired. Continuing to work — even if it’s only part-time — can help keep you engaged. It also allows you to delay collecting Social Security, which will help increase your benefits. And it allows the money in your retirement savings to continue to grow. “Save as much as you can to get ready, but don’t look at the fact that you have to work a little longer as a prison term,” McGrath said.

GOBankingRates found that two-thirds of Americans are not prepared for another recession. If you don’t want to be like the typical American when it comes to your finances, you should take steps to prepare for an economic crisis.

One of the best ways to prepare is with an emergency fund. “The path to financial security starts with having a savings buffer you can rely on in case the unforeseen happens,” Mathu said. You should have an amount equal to 3-6 months’ worth of living expenses in savings. Do this by identifying unnecessary expenses you can trim and have that amount automatically deposited from your paycheck or checking account into a savings account, Mathu said. “That way, you resist the urge to spend and your emergency fund can grow,” he said.

Click through to get 14 tips to build your emergency fund.