Your Financial Situation
The beginning of a new year is the ideal time to take a good look at your financial situation. Do you know exactly what your income and expenses are each month?
But as a good friend of mine, who is constantly meticulously planning her finances, once said. Any day you start is a good day.
I’ll be the first to admit that I doubted her approach to be a sensible one. But due to changed personal financial circumstances, I decided to give it a try.
I’d like to share with you some insights I gained during my journey to get rid of financial headaches.
You might be able to boost your financial situation and lessen stress factors due to money worries by following these simple tips.
Money problems and issues like relocation and divorce and being fired rank amongst the worst stressors.
A solid overview of your finances can help you plan for a stable financial future.
Getting rid of expenses such as unnecessary fixed costs or expensive impulse purchases can make you healthier financially.
The challenge is to understand spending patterns so that you can actively work on your financial dreams.
Thus I give you five tips to get your financial affairs in order.
Tip 1: Examine your motivation
Change is only possible when you are highly motivated. You can make a plan for the new year on new years eve, but that fact alone won’t provide you with the necessary motivation to see you through.
Why are you looking for a (better) understanding of your financial situation?
Maybe you want to end stress, build a nice savings goal or want to reserve for unforeseen expenses. Take time to put that straight.
If you can remind yourself of the main reasons for your financial overhaul, you will more like succeed to keep your financial resolutions.
Tip 2: Take an inventory of your income and expenses
A sound financial management begins with an overview. Knowing what is coming in every month, but also what goes out.
Money often slips between your fingers. Before you know it, all the ones and quarters, tens and fivers add up to a lot of money.
But where did it all go? Many of those small spendings are completely forgotten at the end of the month.
It helps to make an inventory of your expenditures. Don’t delay doing it? Gather all your bills and statements, make a list of your monthly subscriptions and other periodic charges and see what you have to spend on groceries and all the other daily expenses.
You will notice a few things.
First, you pay notice to all the little ways you spend your money. You might buy lunch without even giving it a second thought. You might stop for a morning coffee out of habit.
Secondly, you start to make some choices. You might decide to skip eating lunch out of the office or to stop treating yourself to breaks in a coffee shop for the week and drink coffee the office offers instead because it’s not that much of a difference in taste.
Lastly, reflect on those experiences at the end of the week. Which choices were easy? Some of those choices you will have to make will prove to be easy, and others will be hard. It’s different for everyone. Pay attention to what’s easy to skip and what isn’t. Stick with your choices when you go forward, because those are examples of ways where your spending wasn’t generating much value for you. Which choices were hard? You might want to restore some of those.
In the end, what you’ll find is that you’ve eliminated some forgettable expenses and kept the ones that matter.
Tip 3: Create a household budget
Create a household budget, as a fundament for financial fitness.
Create order in chaos – it helps you manage your finances better throughout the year.
It can be done with old-fashioned paper and pen and with useful digital tools.
You can find various (online) programs to help you with this.
You fill in your income, expenses and savings goals, and they keep track of where, when and how much money you spend.
Tip 4: Get rid of or consolidate credit card debt
Many people have several credit cards to their name. Often with considerable credit card debt.
Having credit cards elevates risk for identity theft and higher interest rates.
So try to live without credit cards. You have to start making choices about what is important to you if you can’t afford something using just your checking account.
Consider consolidating the debts on your credit cards by transferring your balances with the highest interest rates to other cards. Start paying off your balances by taking advantage of those new lower interest rates.
Tip 5: Make a plan to repay your debts
You are certainly not alone if you have a car loan, student loan, mortgage, personal loan, and other debts on top of your credit card debts. These debts can add up to a real problem that restricts your financial and lifestyle choices.
Obviously having to put up a monthly amount in debt payment can limit your day to day financial choices as far as other expenditures are concerned. It has implications for where you can live, and it can even restrict your career options.
Start by making a list of all of your debts. Order them by the annual interest rate.
If possible, merge some of those loans. Do everything you can to avoid adding to any of the debts. And of course, make the biggest possible extra payment you can to the debt on top of the list.
Tip 6: Cut excess fat!
When you think about your expenses fixed costs like rent or mortgage, insurance and groceries may come to mind. You may think there’s not much you can do to lower these costs.
But you may become a smarter shopper by paying attention to what you buy and where you buy. And you may have to consider to swap your health care provider for a cheaper one.
Figurately speaking go through all your other fixed costs as extra insurance, breakdown cover for your car, your energy provider and your ISP with a fine-toothed comb. This often pays off, and your new provider might even be willing to help you move.
You can address fixed expensive easy too. The excess fat where you can do without in some cases. Often these modest amounts don’t account for much but add them all together, and the might amount to much. Think about that magazine you do not read every time. Or Spotify subscription you closed for a special rate of 99 cents but now costs you 9.99 euros each month. And do you need to use your mobile phone that much?
Following the tips as mentioned earlier may leave you in a better state than when you started.
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