We all know the guy who’s living the life. His Instagram pictures are glorious, and his posts show him standing in front of a glamorous jet, accompanied by a post filled with money emojis. Little does the public know that behind the scenes he’s governed by debt and delusion. He didn’t make a plan nor did he get lucky. Let’s not be that guy!
Let us help you sort out your troubles with tools and strategies such as a budget planning, introspection and debt control. Below, find some “key” points that help you dominate your finances, then maybe… the world!
Create a realistic budget, asap.
There’s no way around it, finance domination requires a budget. It’s a great way to avoid a personal financial crisis. You’re probably aware of what you earn each month, but can you identify where it all goes? Take a look at your statements and jot down every cent you spend and on what. If you withdraw from an ATM, try to recall where that cash ended up. You can also start taking notes now and write you expenses down fastidiously in real time. You’ll be amazed at what you find out.
Have you written everything down? Good! Now sort out what you need and what you merely wanted. At this stage, it is critical to identify whether you are spending more than you make. After your purchases have been prioritized, decide how much you want to save each month. Eliminate the superfluous expenses until you hit your mark. Can you live with this budget? Think wisely because the following month is when you put it into effect.
Tip: There are many mobile apps in the market that link to your bank and credit card accounts in order to track the spending for you. Simply search “budgeting” on your respective app store.
Terminate bad habits.
It doesn’t matter how well-intentioned people are, they frequently fall into harmful spending habits. One of the most common and ubiquitous habits -impulse buying- has surprisingly simple solutions. Since impulse purchases mostly involve emotions, that’s what needs to be removed from the equation. Consider the one thing that can suppress an emotion: time. Emotions are sudden, so are impulses. Get in the habit of waiting a short period of time between finding something you’d like to have and making the actual purchase. This short wait will ensure that any emotion controlling the action is sedated, giving way for a clear-headed decision.
Another bad habit that’s worth eliminating is excessive convenience. That delivery app sure is handy when you’re hungry and can’t leave your place. Let’s be honest, sometimes people just don’t feel like crossing the street. Delivery apps charge a hefty premium for the service. Try deleting these programs for a short while and picking up the order yourself. The food might even taste better.
Subsequently, some habits evolve into vices. Heavy drinking, smoking and a night club lifestyle can cost a pretty penny. If you don’t minimize these for your health, do it for your wallet. For example, the University of Massachusetts Medical School worked out an average smoker’s cigarette expenditure. See the chart below.
Organize your bills & payments.
Whilst creating a budget, you probably noticed a lot of funds were going towards monthly bill payments. It’s time to organize these and have control over when, what and how much you pay. There are a variety of sheets that can help with this task. Consider making or downloading a template to write down each payment.
Note everything from mortgage payments to utility bills. Remember to use your bank statement in addition to any paper bills, as a lot of services are paperless. Another location to find recurring payments is your Apple ID or Google Play account. Find them in your mobile device’s settings menu and navigate to the active subscriptions section.
Once you have the final numbers, cross-reference with your budget. Make certain they align. Now you can be more precise when reviewing what has priority. If there is something you can live without, cancel it. A good idea would be to go through all the charges and research the company or service and make sure there isn’t any overpayment. Perhaps they offer a cheaper option. When finished, update your budget.
Consolidate & control your debt.
Debt is like a cockroach. It can show up any given day and be difficult to kill. The average person can easily slip into a cycle of credit card, vehicle, or medical debt. As you work towards a prosperous future, owing money can keep you from your goals. Some people prefer to pay one bill rather than worrying that they missed one of a dozen separate payments. This is called debt consolidation. There are a variety of ways to do it.
You can receive aid through a debt counseling and management plan, if you qualify by your income. These programs force you to cease using credit and maintain a strict budget. In return, you can be debt free in just a few years, depending on what you owe.
Another option would be to take out a personal loan to pay all of the debt, then just concentrate on that one payment. In many cases, we recommend you speak with a finance professional that can provide options tailored uniquely to you. They might provide options such as:
- Borrowing from a life insurance policy
- Taking out a 401(k) loan
- Taking out a home equity loan
Write down your financial plan.
So, if you have a budget with a clear inventory of what your spend and make. Now, what are you going to do with it? The budget helps you get by safely and free of financial tribulations, but what about your dreams and goals? A financial plan puts the budget to action.
Ideally, we want to save for the future. Think pragmatically, plan for emergencies. After the budget is done, make sure you have cut enough that you can save a decent percentage of your paycheck every month.
“If you are living paycheck-to-paycheck, before you do anything else, stop that.” – Shannah Compton Game, CFP.
Certified financial planner Shannah Compton Game suggests you use the 50/30/20 rule. Use 50% of your paycheck towards necessities, 30% towards “extra” items, such as recreational activities and the remaining 20% should be saved.
In conclusion, all of the researching, taking inventory, tracking and planning is only worthwhile if it’s actually put into action. Plan a short amount of time each month to stay up-to-date and track any measurable progress. It’s a good idea to start a relationship with a financial planner, as well. Find someone to have your back and surround yourself with people who support you and nurture your aspirations. Once you have a long-term plan, take it one day at a time.