What would you do if you heard of the existence of a magic wand that allows you to manage your financial life or even better a magic spell that when cast instantly eliminates your money worries. You’d certainly buy it right? Well, while that is stuff of pure fiction, there are five techniques at your disposal right now that would realistically help you get a better handle of your personal finances. Consistent implementation of these techniques has seen thousands of individuals not only get out of debt but also thrive financially without the need of a fairy godmother.
And without further ado we’ll start off with technique number one to realizing debt free life and keeping personal finances in check and by the way; following these techniques has an added benefit of significantly improving your credit score.
List Your Money Goals
Create time and write down in as much detail as possible your shorter term, medium term and longer term financial goals. So whether it’s that bucket list trip through Asia, starting a business to generate income and get out of employment, invest in the property market. These goals will dictate how you plan your finances. Here’s an example: suppose one of your goals is early retirement, then that will for the most part be determined by how you save cash now. Also, don’t forget that things like starting a family, home ownership, career change or relocation will be affected by the way you manage your personal finances today.
So once you’ve listed all your money goals, next step is to prioritize them. Doing that has the advantage of ensuring that your attention is focused on the most important things, you might also want to arrange items in the order you want to accomplish them, longer term goals like retirement saving can be taken care of alongside other goals.
Tips on how to put your goals into perspective:
– Prioritize longer term goals like buying a home, becoming debt free, retiring early.
– Work with a financial planner to draft a financial plan
– Establish short term goals like cutting spending, following a budget, reducing credit card use.
Itemize and Stagger Your Plan
A financial plan is a mission critical tool in your arsenal without which it’s almost impossible to reach your financial objectives. A good plan should be itemized and staggered out in milestones. A sample plan should entail a spending plan and a monthly budget, this will help curb unnecessary spending that often leads to debt.
Once these three things are realized and you’re consistently following your new plan for a couple months then you may notice that you’re ending up with extra money and the money freed from debt repayments can be rolled over to the next set of goals.
Just to reiterate, it’s important that you’re clear about your top priorities and even more important that you maintain momentum working towards realization of your longer term goals through execution of your shorter term goals. Fancy a luxurious cruise trip? Start investing, want to start a business or buy a home? These are among key things you should have top of mind and that naturally influence the next step.
Your outlined goals coupled with an emergency fund will help ensure that you’re making sound financial decisions free from fear and thus better managing your money situation.
When drafting a financial plan, bear these points in mind.
– Spending plan and budget are the keys to success.
They’re the tools that will help you best control your financial future. Spending plan and budget determine the shape of the rest of the plan.
– Setting up an emergency fund is another critical factor to financial success and stress free life.
– Consistently save towards retirement irrespective of the stage you’re in.
Follow a budget
To succeed financially you need to keep your spending in check and that’s only possible when you know where each dollar is going, that way you can create a spending plan and allocate funds in a manner that helps move things in the right direction. A budget should help you spend less than you earn, which in turn will allow you to settle debts, save towards retirement and grow your emergency fund.
Not having a plan often leads to spending cash on things that are not important or which might seem important now but do nothing in terms of improving your financial situation in the future. Don’t forget to toast to the small victories along the way i.e. celebrate when you settle your debts or treat yourself to a reward when you manage to build an