Wouldn’t it be nice if there was a magic formula or an easy trick to do it so you never have to worry about money again? If you are tired of being constantly stressed out about money, then it may be time to control your personal finances. There are five keys that can help you control your finances. Follow these five steps consistently and your financial problems will begin to lessen, along with the accompanying financial stress.
While that may not be realistic, there are a few simple things you can do now to improve your money situation. Try these five steps to successfully manage your personal finances. Another bonus? By following these five tips, your financial problems may begin to diminish, and you can begin to reap the rewards of lower debt, save for the future, and a strong credit rating.
Tips for Successfully Managing Your Personal Finances
Detail your financial goals
Take time to write specific long-term financial goals. You may want to take a month-long trip to Europe, buy an investment property, or retire early. All of these goals will affect how you plan your finances. For example, your goal of retiring early depends on how well you save your money now. Other goals, like home ownership, starting a family, moving, or changing careers, will be affected by how you handle your finances.
Once you have written your financial goals, prioritize them. This organizational process ensures that you pay the most attention to those that matter most 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 toward it while working on your other goals.
Here are some tips on how to clarify your financial goals:
- Set long-term goals, such as getting out of debt, buying a home, or retiring early. These goals are separate from your short-term goals, such as saving for a good night out.
- Set short-term goals, such as sticking to a budget, cutting expenses, paying or not using your credit cards.
- Prioritize your goals to help you create a financial plan.
Give body to your plan
A financial plan is essential to help you achieve your financial goals. The plan must have multiple steps or milestones. A sample plan might include creating a monthly budget and spending plan, and then getting out of debt.
Once you have accomplished all three of these things and followed through on your new plan for a few months, you may discover that you have extra cash and that the money you release from your debt payments can be used to reach your next round of goals.
Again, it is key to decide which priorities are most important to you. Keep constantly working toward your long-term retirement goals, but also start focusing on the most important short-term goals you’ve set for yourself. Do you want to make an extravagant trip? Start investing? Buying a home or building your own business? These are all things to consider when deciding your next step. Your goals, along with an emergency fund, will help you stop making fear-based financial decisions and help you manage 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 over your financial future. Your budget is the key to achieving the rest of your plan.
- You should continue to contribute to long-term goals, such as saving for retirement, regardless of the stage of your financial plan.
- Creating an emergency fund is another key factor for financial success and stress reduction.
Make and stick to a budget
Your budget is one of the most important tools to help you be financially successful. It allows you to create a spending plan so that you can allocate your money in a way that helps you achieve your goals. You can make your budget as high or detailed as you want, as long as it helps you reach your ultimate goal of spending less than you earn, paying down debt, covering your emergency fund, and saving for the future.
A budget will also help you decide how to spend your money in the coming months and years. Without the plan, you could be spending cash on things that seem important now, but don’t offer much in terms of improving your future. Many people get caught up in this quagmire and become discouraged about failing to reach the financial milestones they want for their family and their own lives. 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 meet your budget for three solid months, or when you successfully complete your emergency fund.
If you are married, you and your spouse must work together on the budget. Working together makes it fair to both of you, and you both have the same level of commitment to achieve it. This unit can go a long way in helping you avoid money-related arguments. Here are some tips for married couples who want to create a budget together:
- Consider switching to an envelope budget system that uses cash for spending areas that require more discipline.
- Use a budget software with a mobile application to be able to enter expenses in real time.
- Plan expenses in advance to avoid overspending.
Pay the debt
Debt is a huge hurdle for many when it comes to reaching financial goals. That’s why you should make removing it a priority. Set up a debt elimination plan to help you pay it off faster. For example, while making minimum payments on all your debt accounts, pay any extra money for one debt at a time. After paying a debt account, move all the money you were paying on the first debt to the next debt and continue from there, creating a “snowball effect” of debt repayment.
Once you are totally debt free, commit to being debt free. Leaving credit cards at home can be a good strategy. Save an emergency fund to cover unexpected expenses, so you won’t be tempted to use a credit card to cover them.
Try these tips to help you pay off debt faster:
- Sell unused or unwanted items in your home to find extra money to add to your debt payment plan.
- A second job can help speed up the process and may be necessary if you want to make quick or lasting changes to your situation.
- Find areas where 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 increased your savings and want to start investing to increase your wealth, talk to a financial planner to help you make sound investment decisions. A good advisor will share the risks involved in each investment and help you find products that match your comfort level and your return on investment needs, while helping you achieve your goals as quickly as possible. A financial planner can also help you with your budget, which is another advantage.
Investing is a long-term strategy that helps you generate wealth. You can also find financial aid elsewhere, such as:
- Look for a local church or community center that offers free or low-cost classes or workshops on personal finance and budgeting. Occasionally, banks and credit unions also offer courses.
- Find a mentor who is willing to help you formulate and draft your budget for the first few months. This mentor can help you if you are overwhelmed by the budget process.
- If your parents or other family members are good with money, consider asking them for help and talking to them about what worked for them financially and what they would have done differently.
It doesn’t have to be a difficult experience to pay off your debt, save money, and progress toward your financial goals. Invest in yourself and your financial future so you never have to worry about your finances again.