Financial woes abound for many people around the world. A struggling global economy combined with rising costs of living adversely affect people who would otherwise be doing well. With businesses going under or being downsized, company loyalty appears to be a thing of the past. When once the great dream was to get ahead financially, now the prospect of getting one’s head above water sometimes feels like a lofty goal. Working hard and saving a bit here and there will not provide enough for any man or woman that hopes to become financially self-sustaining. To be successful, meaning OK, it takes turning the care of one’s finances into a professional business. Only by gaining a clear understanding of where the money’s coming from, where it’s going, and how it could be better used can one become financially independent.
Sound overwhelming? Break it down into smaller bites.
Make a concentrated effort to look at all income and out-go by collecting receipts, keeping an accurate ledger, and looking over bank statements with great care. Find a mobile app or laptop programmer to help devise and maintain a budget. Visually-oriented learners should have the ability to turn all numbers into a graph or chart that makes more sense. Once it’s clear how much money is coming in and slipping away then it’s time to start making necessary changes.
Is rent too high?
Are late fees common occurrences?
Is a shoe obsession breaking the bank?
Just because expenses are identified does not necessarily mean you’ll be required to nix them. Well some of them, yes, but the whole point of creating a workable budget is to find that happy balance between enjoying now and preparing for tomorrow. Some people, no matter how strapped for cash, will not drink cheap coffee. And that’s alright! However other things will most likely have to give in order to warrant that rare Sumatra blend.
Identify Hidden Expenditures
It’s often the little things that count, particularly when it comes to finances. Inflated interest rates, constant late charges, going over text and minutes limits, and on and on will be absolutely shocking when tallied up each month. If you’ve ever asked, “Where does all my money go?” a clear accounting of everything—big and small—will give you a true understanding. It doesn’t mean it will be pretty to see but it’s a necessary positive step towards financial freedom. So take everything into account—even that poor parking choice that ended up becoming fine. Seeing it all in black and white should be a reminder to think about potential long-range ramifications when making decisions.
Eliminate “Bad” Debt
Most financial experts believe there is “good” debt and “bad” debt. Just as many disagree on what exactly those things are. Carrying over a balance on high-interest credit cards is universally considered bad debt. Not only do the fees and finances charges equate to throwing money away, overdue payments could cause great harm to one’s credit score. Such news may not cause immediate concern but when going for an auto or home that bad credit could be the deal breaker. Plus more and more prospective employers are looking at credit scores during the hiring process. Yes it may seem invasive but many in the position of hiring want to know how well you can manage money, and it may say more about you than you’d ever care for someone to know. So pay off school, credit card and auto loans at the agreed time and be sure to prevent any bills from being sent to a collections agency.
Another crucial step is learning to save wisely. Once it’s become clear where the money’s going, the ill-advised expenditures are lessened, and the late fees are eradicated more cash will be on hand. Granted to get to this point a second job may be needed but things are looking up for the first time in a long while. Now it’s time to figure out what to do with the extra cash. Whenever possible, make your money make money. That means finding a savings plan with better-than-average return rates and also diversifying your portfolio. If your job is willing to contribute to a savings or pension plan be sure to also contribute as much as possible, though note that some investment options are much higher risk than others. They may offer greater potential rewards but with much more risk of loss involved. To gain more insights, speak with a financial professional but note that everyone has their own agenda.