Many people think that their financial life is not important; that it is out of their control and that it does not affect their happiness. Whilst it is true that money doesn’t buy happiness, it takes money and financial stability to create a situation where you can reduce stress and monthly anxiety over bills, and about your long-term future.
If you start to live the tips in this piece, you may be surprised how much more control you feel you have over your finances, and how much better you can make your life.
Read on to learn some of the fundamentals of managing your finances to live a better life.
Take stock of your current financial situation
The first step to managing your finances is to take stock of where you currently are with your finances.
This list is very simple and can be divided into four sections:
- What do you do with your money?
- What are your debts?
- Are you getting the most out of your salary?
- What is your long-term financial goal?
- What can you do to get there?
If you don’t have a long-term financial goal, then this is the time to develop one.
As we all get older, life becomes increasingly complex, there is more for us to worry about, and we need to start to look after our finances. Setting some goals for yourself can make the process easier and motivate you to achieve your goals.
Make a plan for your money
Once you have taken stock of where you currently are with your finances, you need to start making a plan to improve your financial situation.
Here are simple steps to take:
- Step 1 – Create an Investment Plan
- Step 2. Make a budget
- Step 3. Analyse your spending
- Step 4. Evaluate your investments
- Step 5. Start saving and Invest
- Step 6. Pay off your debt
- Step 7. Set your goals
- Step 8. Stay on track
- Step 9. Set up the right bank accounts
- Step 10. Create a plan to pay off debt
- Step 11. Plan for a rainy day and retirement
Set the right financial goals
In the world of investing there are two types of financial goals that an investor can set. Short term goals (usually one or two years ahead) and long-term goals (more than two years ahead.)
There are many factors that can determine your long-term financial goals such as:
- Your income
- Your age
- Your living standard
- Your lifestyle
- Your needs
- Your savings
- Any personal circumstances that may arise
- Your health
- Your career and industry
- Your long term wealth creation
- Your investment strategy
- Your current goals and plan
Check in with your finances regularly and manage your budget
Money management is the process of expense tracking, investing, budgeting, banking and evaluating taxes of one’s money which is also called investment management.
The most important part of managing your finances is checking in on a daily basis to determine if you are on the right track for your financial goals. You need to check in with your long-term financial goals on a monthly basis to make sure that you are on track.
Also, setting aside money helps people stay on track with their finances, as they won’t be tempted by low interest rates and all those things that “spend money fast” offers.
You also need to look at your spending in detail. First is what are we paying on our home, what are our other debts, and where are our savings? Next it is important to look into our checking account, savings account, and credit card accounts, as your account can tell you a lot about the status of your finances.
It is good to have at least one person to check in with you, to make sure you don’t cheat on your budget and your finances. If your budget is at least realistic it will keep you on track.
When it comes to money management you need to be consistent with your goals, and your priorities. You need to have a system and be consistent in your spending as well. You need to manage your finances for a better life.
Many people use excel on a computer which can be extremely useful for tracking their finances. You can also have a money book, which shows money left, money spent and money saved. Having this kind of tracking also helps people manage their finances more successfully.
Create a plan to pay off debt
Debt is the #1 financial killer.
Debt can make you feel poor. Debt can make you feel anxious and afraid. Debt can ruin your peace of mind and make you feel down. Debt can take years off your life and cause you to lose confidence in yourself. Here are some tips to help you to become debt free:Debt is a choice. Take responsibility for choosing debt and learn to pay it off!
According to finance experts at mortgages.co.nz, the key to learning to manage debt is finding the right motivation. This can be as simple as a commitment to yourself or a financial institution.. Or looking for better options when it come to mortgages and loans.
If you feel you are really in debt, then take positive action to begin to remove that debt.
This could include learning to manage your expenses, setting up a budget and sticking to it, cutting back for a certain time period, setting up a savings account, and/or making additional financial contributions. Even if you don’t feel you are in debt (which is also a choice), you might feel unhappy with your spending and savings. You might be motivated to learn more about managing your financial life so you can start to make it better for yourself.
Make sure you understand debt and how much it is costing you. Get it paid off in priority order, based on cost.