When you think about your finances, are you generally happy with them? Or do you wish you could do better?
According to a 2015 NFCS study, only 31% of respondents indicated they were satisfied with their personal financial condition. That tells me there’s PLENTY of room for improvement!
These three essential steps will teach you how to manage your money better.
DETERMINE YOUR CURRENT FINANCIAL SITUATION
The first step to managing your money wisely is to figure out where you stand right now. Before you can make (and more importantly SEE) progress, you need to have a clear picture of your current financial health.
Do you know what you have in savings right now? What about what you owe on your credit card(s)?
OK, even if you know both of those, what about something you probably pay less attention to…what about how much you currently owe on your mortgage or car loan?
You wouldn’t start a diet or begin an exercise routine without knowing your starting weight, right? You want to have a way to measure your progress!
The same thing is true with your money.
You’ll want to get a good idea of where you stand now (even if that you are frustrated or ashamed). Everyone has to start somewhere and being honest about your current situation is the first step on your climb to financial success.
Important points to consider:
Do you currently use a budget or track your spending in any way?
If no, it’s a great time to start!
If you do track your spending, how having you been doing?
Do you find that your spending is in line with what you’ve budgeted? Are financial goals a part of your monthly budget?
Do you currently have an emergency fund or savings account?
If you do, are you comfortable with the current balance? Would it be enough to cover an emergency like a care repair or vet bill?
If you don’t have an emergency fund yet, it’s time to start one! The sooner you start, the sooner you will have peace of mind. Even if you can only spare a little at a time, it will add up over time.
What are your current debts?
Do you have a clear picture of your debts? What companies do you owe and how much do you owe on each debt? Are you only making the minimum payments?
Even though looking at how much you owe (when you consider everything) might be daunting, it’s an important step to move forward.
DEFINE YOUR FINANCIAL GOALS
Once you have a clear picture of your finances, you’ll want to use this picture to define some goals. Figure out what you want to work towards.
Let’s go back to the diet and exercise example. If you are starting an exercise program to lose 20 pounds, you’ll be much more successful when you have the specific end goal of losing 20 pounds in mind.
The same principal applies with your finances.
You need to have a specific end goal in mind. Ideally, you should have both short-term and long-term goals for your money.
Think about what you want to achieve in the next year or two. Some short-term financial goal examples might be building your savings, paying off a credit card, or even funding a vacation.
Then think about the long-term. What do you hope to accomplish that extends past the next 10 years or so? Some examples might be building your retirement fund, funding college for your children, or buying a vacation property.
MANAGE YOUR MONEY WISELY WITH A PLAN
Failing to plan is planning to fail.
— Alan Lakein
If you want to manage money effectively, you must have a plan to reach your goals! This could be as simple as creating a budget to tracking your expenses and spending. It could be setting up automatic transfers to build your savings.
Regardless of what your money goal is, you need to have a plan to make it happen. Preparation and planning are key factors to financial success!