FIVE Keys to Successfully Managing Your Personal Finances
Wouldn’t it be nice if there was some magic formula or easy trick that allowed you to never have to worry about money or managing your finances, ever again? If you’re tired of constantly being stressed out about money, the following techniques can help you gain more control over your personal finances.
There are five key ways that you can manage your financial situation and take back control over your money. If you follow these five steps consistently, any financial problems will start to diminish, and you can start reaping the rewards of lower debt, and saving for the future.
Detail Your Financial Goals
Take some time to write specific goals about what you want to do with your (fiscal) life targets and the money you’ll need to meet your goals. For example, your goal to travel the world affects how you will plan your finances. Your goal to retire early is dependent on how well you invest your money now. Other goals, including homeownership, starting a family, moving or changing careers will all be affected by how you manage your finances.
Once you have written down your financial goals, prioritize them by setting targets – you can’t score a goal without hitting the target first! So, small achievable stepping stones to guide your way. This ensures that you are paying the most attention to the ones that are of the highest importance to you. You can also list them in the order you want to achieve them, but a long-term goal like saving for retirement requires you to work towards it while also working on your other goals.
Below are some tips on how to get clear on your financial goals:
- Set long-term goals like getting out of debt, buying a home, or retiring early. These goals are separate from your short-term goals.
- Set short-term goals, like following a budget, decreasing your spending, paying off or not using your credit cards.
- Prioritise your goals to help you create a financial plan.
Flesh Out Your Plan
A financial plan is absolutely essential in helping you reach your financial goals. The plan should have multiple steps or milestones. A sample plan might include getting control of your budget, creating a spending plan, then getting out of debt.
Once you’ve accomplished these three things and have followed through on your new plan for a few months, you may find that you have extra cash, and the money you free up from your debt payments can be used to reach your next round of goals.
Decide what priorities are the most important to you. Keep steadily working toward your long-term retirement goals, but also start to focus on the most important near-term targets you have set for yourself. Do you want to take an extravagant trip? Start investing? Buy a home or build your own business? These are all things to consider when deciding on your next step.
Your goals, along with an emergency fund, will help you stop making financial decisions based on fear and help you get control of your situation. When creating a financial plan, remember these things:
- Your budget is key to success. It is the tool that will give you the most control of your financial future. Your budget is the key to achieving the rest of your plan.
- You should keep contributing to long-term goals like saving for retirement no matter what stage of your financial plan you’re in.
- Building an emergency fund is another key factor to financial success and stress reduction.
Making and Sticking to Your Budget
You can make your budget as high-level or detailed as you want, but the ultimate goal is to help you decide how to spend your money over the coming months and years. Without the plan, you might spend your cash on things that seem important now, but don’t offer much in terms of enhancing your future. Many people get caught in this quagmire and get down on themselves for not reaching the financial milestones they want for their family and for their own life.
Congratulate yourself once you pay off your debt! After you are out of debt, though, it’s still important to have a budget. It is easy to spend more than you make, and if you stop tracking your spending, you could slide back into debt.
If you are married, you and your spouse need to work together on the budget so that it feels fair to both of you, and you both have the same level of commitment towards achieving it. This can go a long way towards helping you prevent money-related arguments. Below are some tips for married couples who want to create a budget together:
- Consider switching to an envelope budgeting system that uses cash for spending. This requires more discipline but once spent you can’t spend it again!
- Use budgeting software with a mobile app so you can enter spending in real time.
- Keep planning ahead to avoid any overspending.
Pay Off that Debt
Debt is a huge obstacle for many when it comes to reaching financial goals, so make eliminating it a priority. Set up a debt elimination plan, to help you pay it off more quickly. For example, while making minimum payments on all of your debt accounts, pay any extra money towards one debt at a time. After paying off one debt account, move all the money you were paying on the first debt to the next debt and continue from there, creating a debt-pay-down “snowball effect.”
Once you are totally out of debt, make a commitment to stay out of debt. Always leave your credit cards at home (or better still cancel them all, except for one that you MUST pay off in full each month), and save up an emergency fund to cover unexpected expenses so you do not need to turn to a credit card to cover them. Try these tips to help you pay off debt more quickly:
- Sell unused or unwanted items around your home to find extra money to add to your debt repayment plan.
- A second job can help speed up the process and may be necessary if you want to make fast or lasting changes to your situation.
- Look for areas in which you can cut your budget to increase the cash available for your debt payments.
Don’t Be Afraid to Ask for Advice
Once you have grown your savings and want to begin investing to increase your wealth, speak to an Independent Financial Adviser to help you make your investment decisions.
A good Adviser will share the risks involved in each investment, and help you find products that match your comfort level and investing return needs while helping you work towards your goals as quickly as possible. A financial planner can also help you with your budget, which is another plus.
Getting debt paid off, money saved and progress made towards your financial goals doesn’t have to be a difficult experience. Invest in yourself by hiring a professional Adviser (not an unqualified self-opinionated “expert”) to make your financial future so that you won’t ever need to worry about your finances again.
Contact me if you need help in getting started properly, once and for all…………….