Having control over your finances is something that we all want to achieve. While things may not be where you want them to be, there are practical ways for you to reset your finances to get them to where you need them to be. Like any great thing, it will take time, but here is how you can get started.
Before we start
Please note that this does not constitute as financial advice, but a general guideline. It is important to speak to an accredited financial advisor who will be able to advise you based on your situation to find a solution that will be best suitable for you.
Have a goal
When it comes to any type of financial plan, it is crucial to set goals. Speaking to a financial planner can help you get there. However, you can also achieve this by being specific with your financial goals. Think of your short term goals and your long term goals. Whether you want to purchase your first home or second property. Start planning for your child’s education needs. Planning and saving for a holiday or planning how you are going to achieve financial freedom, write it down and plan how you are going to achieve your goals. The aim is to help you keep track and adjust accordingly without placing a financial strain on yourself.
Spend less than you earn
Lifestyle creep is inevitable. The more we earn, the more we choose ways to improve our life. However, this can easily become a problem when it starts going over our budget or it becomes difficult to keep up with when hard times come. Living below your means can give you enough breathing room to deal with unexpected expenses or changes that you may have not being anticipating that can affect you financially. Always keep in mind that just because you can afford it doesn't necessarily mean you should get it.
Always invest in yourself first
Ever heard of the saying ‘pay yourself first’? What does it actually mean? You work hard for your money, and you need to ensure that your money works for you. The best way to do that is to make sure your savings and investments, life cover as well as retirement fund contributions are planned for and deducted before receiving your nett income.
Track your finances
Budgeting and tracking your finances will be the best tool when resetting your finances. It will show you what you are earning and where your money is going. It will also paint a clearer picture of things that are causing you to bleed. It may not be the most exciting thing to do, but it will help you stay on track with your financial goals and also steer clear of things that could end up draining you financially.
Differentiate between good and bad debt
Not all debt is bad. Your home is good debt. Yes, you pay interest, but at the same time, you have an asset that appreciates in value. Your car, if you need your car to earn an income, that is also good debt. The trick is to avoid purchasing a car based on what you qualify for but rather on what will meet your needs. Other culprits of bad debt to keep an eye out for are; credit cards, personal loans, and overdraft facilities. Please note, a credit card is not free money. You will have to pay interest on the balance. Avoid taking out a personal loan unless you really need it.
