What stage are you in in your financial life? If you are not happy with where you are right now, the good news is that you can actually reboot your finances once and for all. True, your financial woes will not disappear overnight but it will give you a chance to change your financial future. In the computer world, a reboot means the act of instantly shutting down your computer and restarting right away. The same is true with your finances. You can actually shut it down and restart right away. Don’t wait until next month, next year or when things start going well again. Do it as soon as the clock strikes zero o’clock. So, how to reboot your finances?
1.Abstain from Spending
The first thing to do is halt all spending at once. Unless it is a necessity, stop all unnecessary spending for now. A cup of coffee, a pack of cigarettes or a can of soda may be little expenses but it is actually these kinds of small expenses that is harming your budget. While you are at it, refrain also from using your credit card. Until you have fully understood how credit cards work, it is best to put your card use on hiatus.
Beware of little expenses, a small leak will sink a great ship.
– Benjamin Franklin
2. Track your Spending
The next thing to do is to track your expenses. Why do you need to track your expenses? The main reason why you should write down all your spending is for you to be able to identify where your money is going. Record everything that is going out of your pocket even small ones like a piece of candy, tips or parking fees. Don’t miss anything. Only through knowing will you be able to control your finances and eliminate bad spending habits.
3. Set Financial Goals
Now that you know where you are right now in your finances, the next thing to do is to define where you want to go from here. Thus, it is important to set your financial goals. Identifying your short-term, mid-term and long-term goals are crucial in your journey towards financial freedom. Your goals will help you make better financial decisions in the present. For example, you will not do an impulse buy on a new handbag that you see on the display window of a mall when you have an upcoming spring trip to Japan or New York for example.
4. Follow a Budget Plan
A budget is a financial plan on how you plan to spend your money. Since it allows you to plan your expenditures, following a budget will help you define your limits as far as spending is concerned. A budget will help you know if you can afford something or not. T. Harv Eker, best-selling author of Secrets of the Millionaire Mind introduced the money jar budgeting system. It is a simple money management system that will not only solve your finances but you can actually lead you to wealth accumulation.
A budget is telling your money where to go instead of wondering where it went.
– Dave Ramsey
5. Pay-off Bad Debts
Once you have your budget plan in place, you must first focus on paying off your bad debts. You see, not all debts are created equal. There is such a thing as good debts and bad debts. Good debts are money that you owe that can help you build your wealth over time. A housing loan is considered good debt. Money that you loan to use as capital for your business is also considered good debt. Bad debts on the other hand, drags you down. Examples of bad debts are consumer and credit card debts. Thus, it is important to prioritize paying off bad debts first.
6. Start Investing
Saving money alone is never enough. In order to grow your wealth, you need to learn to invest. As opposed to working for money, investing allows money to work for you. There are so many investment vehicles to choose from depending on your risk tolerance. You can invest in bonds, funds, stocks or stock options. You can also invest in real estate, jewelries, antiques, art pieces, even luxury watches and bags.
7. Raise Your Financial IQ
And last but not the least is you should make an effort to raise your financial intelligence. Financial literacy equips you with the knowledge and skills that you need to be able to manage money effectively. There are many things that you wish you learned in school. Unfortunately, most schools do not teach money management. Thus, it is up to you to fill the gap.
What are you waiting for? Reboot your finances now. Good luck!
Feature Image by Amit Karkare from Pixabay