Worrying about money or how to manage your finances is a challenge we face everyday. Imagine there was a magic formula or simple trick to end this daily worry.
Unfortunately, that can only be a wish or dream. However, there good news is that there are simple you can follow and actions you can take today to improve your financial situation and in the future. If you stick to these, your financial problems may start to diminish, and you can start reaping the rewards of lower debt, saving for the future, and a good credit score.
1) Set Your Financial Goals
Take some time to write specific, short-term and long-term financial goals. You may want to take a vacation, buy a new home, buy a new car, start a family or wish to retire early etc. All of these goals depend on your finances. For example, your goal to retire early is dependent on how well you save your money now. Other goals, including homeownership, starting a family, moving, or changing careers, will all be affected by how you manage your finances. If you are married, discuss and set these goals with your partner.
Once you have written down your financial goals, prioritize them. This process ensures that you are paying the most attention to the ones that are of highest importance to you. You can also list them in the order you want to achieve them.
2) Flesh out Your Plan
A financial plan is essential in helping you reach your financial goals. The plan should have multiple steps or milestones. Your plan should include monthly budget, review of your lifestyle to cut out expensive luxury, opportunities to earn extra income etc.
Once you have fleshed out and have followed through on your new plan for a few months, you may find that you have extra cash, and the money you save can be used to reach your next round of goals.
Again, it’s key to decide what priorities are most important to you. You may keep steadily working toward your long-term retirement goals, but also start to focus on the most important short-term goals you have set. Do you want to buy a home or build your own business? These are all things to consider when deciding on your next step.
Your goals, will help you stop making financial decisions based on fear and help you take control of your situation.
3) Create and Stick to a Budget
Your budget is one of the most important tools that will help you succeed financially. It allows you to create a spending plan so you can allocate your money in ways that will help you to reach your goals.
You can make your budget as high-level or detailed as you want, as long as it helps you reach your ultimate goal of spending less than you earn, paying off any debts, padding your emergency fund, and saving for the future.
A budget will also help you decide how to spend your money over the coming months and years. Without the plan, you might spend 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 their own life.
Don’t forget to celebrate small victories along the way. For example, congratulate yourself once you pay off your debt, or reward yourself when you stick to your budget for three months solid, or when you successfully pad your emergency fund.
If you are married, you and your spouse need to work together on the budget. Working together makes it feels fair to both of you, and you both have the same level of commitment towards achieving it. This unity can go a long way towards helping you prevent money-related arguments.
4) Pay off Debt
Debt is a huge obstacle for many when it comes to reaching financial goals. That’s why you should 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-paydown “snowball effect.”1
Once you are totally out of debt, commit to staying out of debt. Leaving credit cards at home may be a wise strategy. Save up an emergency fund to cover unexpected expenses, so you aren’t tempted to use 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 can 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.
5) Seek Expert Financial Advice
Once you have grown your savings and want to begin investing to increase your wealth, speak to a financial planner to help you make wise 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 toward your goals as quickly as possible. A financial planner can also help you with your budget, which is another plus.
It doesn’t have to be a difficult experience to get your debt paid off, money saved, and progress made towards your financial goals. Invest in yourself and your financial future so that you won’t ever need to worry about your finances again.