All people can find it difficult to stay on top of their finances, but alas, it’s just a fact of life. Whether you’re a budding entrepreneur or you’re trying to find new ways to make extra income, one of the best assets you can have is a strong financial position. After all, a secure cash footing enables you to take chances, grow your income, and – through savings and the like – allows you to free up more of your money. But how do you go about reaching a strong financial position, if you’ve never been there before? We take a look below.
Change Your Mindset
Before you can achieve a healthy financial position, it might be necessary for you to change your mindset and approach to money. It’s not an aspect of your life that is beyond your control, or which you just need to react to; it’s something that, managed properly, can have a positive impact on your life. And if it’s managed incorrectly, then it can have a negative impact on your life, too. Before you get too involved in the ins and outs of personal financial management, think about what you’re trying to correct or achieve by being more involved with your cash. In doing so, you’ll be assuming responsibility for something that is entirely down to you, and nobody else.
Have a Thorough Overview
You won’t be able to plot your financial route before you have a strong understanding of where you are. Your financial situation may or may not be pretty reading, but it’s imperative that you have a comprehensive overview of your incomings, outgoings, debts, and any other financial commitments. As well as taking into account these, you should also obtain a copy of your credit report. These are easy to get and reveal a lot about the state of your finances. You might even find that you have items incorrectly listed on the report; thus, improving your financial situation might be as simple as having the errors removed.
Thinking Short and Long Term
No one thinks that their money is just for today. It’s for the future, but then even then, it can be divided into separate categories. For example, your short, mid, and long-term goals. Your short-term goals will be things that you want to achieve within six months to a year, such as reducing your expenditures by a third. Your mid-term goals could be to eradicate all of your debt, and your long-term goals could be to own your own home and have enough for a comfortable retirement.
Getting the Knowledge
Of course, knowing exactly what to do with your money is not an easy matter. Like everything else in life, when it comes to your finances, knowledge is power. Luckily, we live in an age where information is easily accessible to all. There’s no great mystery surrounding personal finance concepts; you just have to spend some time reading about it! Take a look at the Marketreview website for insightful articles about all things personal finance. Speak with friends and family members about the practices that worked for them. When it comes to the big investments, or you receive a cash windfall, speak with a financial expert to determine the best course of action.
Give Yourself a Month
People generally have a pretty poor understanding of how much they spend. And with people prone to paying for their goods with cards, losing track of automatic monthly expenses, and so on, it’s easy to see why this is the case. If you’re changing your money habits, then don’t do it cold turkey. Give yourself a month to track all of your expenses; that is, where every cent of your spent money is going. By the time the month is up, you’ll have a much deeper understanding of how much your lifestyle costs you – and where it’s possible to make savings.
Reduce Your Spending
You should see that it’s easy to reduce your spending once you see how much money you’re wasting! By reducing your spending, you have the potential to give yourself a raise of 20% – all the money that you don’t spend can go straight into your savings account! The majority of people have little concept of budgeting, but it’s worthwhile, purely because you barely feel the lifestyle changes, but do notice your ever-swelling bank account. For example, paying for lunch every day might be nice…but multiply the number by 5, and then that number by 52, and then that number by 10…and you’ll see how much money you’re spending over the course of a decade all because you don’t make your own lunch.
Match Your Luxuries
Now, you’ll see many a website promoting a frugal lifestyle. But for starters, for some people that’s unrealistic. And in any case, there is plenty of joy to be had in life; you don’t want to miss out on them! So instead of abstaining from these things, just change one small detail: whatever you spend on your luxury item, you have to put the same amount of money into your savings account. It might make you think twice about buying that new TV…but at least if you do choose it, you’ll be improving your finances at the same time.
Cut the Credit Card
Credit cards can be useful and are in fact recommended if you pay off the balance each month. But if you can’t trust yourself not to overspend, then you’ll be better served by getting a pair of scissors and cutting them up. It’s much easier to pay down credit card debt when it’s not continually being topped up! Becoming reliant on your credit card is a red flag that all is not well in your financial life.
Review and Update
Finally, remember that the key to financial health is to continually perform reviews, and to update your goals, budget, and so on as your circumstances change. Have a close look every few months, and you’ll be unlikely to go wrong.