Hey Fam! I hope you had a blessed week. I am so excited to share these tips with you, so let’s jump right into it.
Proper money management aids in achieving physical, spiritual and mental health so it is very important to manage your money well. While I could jump right into money saving tips and great investment options that I have learnt of on my own journey towards financial stability, it makes no sense if you don’t know what you are saving towards, whether or not you are spending more than you earn or how much extra revenue you may need to be earning to achieve your financial goals. To prepare yourself to achieve financial stability, you first need to find out your current financial position. So I’m going to share with you 4 key preliminary steps you should take on your ascent to a more secure financial future.
Step 1: Put your life into focus
I have put together a mini quiz that allows you to actually see the expected total amount of money you will have to achieve your financial goals based on your current income, when you want to retire and how long you expect to live. It gives you a rough estimate of how much future income you will have at your disposal. Please take the quiz below:
So how did you do? A high percentage is not a good thing in this case. If the amount you need during retirement is more than 40% of your expected earnings for the rest of your working life, then you need to either lessen your current spending where practical, try earning additional income, allow your money to grow for you by investing wisely or do a combination of the three. In subsequent posts I will give you some money saving, making and investing tips.
Step 2: Do a budget of your current income and expenditure
That is calculate all your current streams of income (salaries, investments, etc) and all the expenses you have (credit card bill, hire purchase, utilities, food etc.). This could be a daily, monthly or annual budget, depending on your needs. I would recommend doing a monthly budget and adding up each months’ income and expenses to give you an annual picture of your revenue and expenditure. It may be easier to do a monthly budget and then multiply it by 12 but doing it the suggested way accounts for all items of income and expenditure which may vary from month to month. Need help doing a budget? Here is a link to an online budget calculator. However if you would like a more detailed budget, comment the word ‘budget’ below and I will do a downloadable budget in Microsoft excel, if I get over 10 of these comments.
The aim of having a budget is to keep your finances in check. When your income is greater than your expenses you have a budget surplus. Likewise, if you are spending more than you earn then you have a budget deficit. Usually everyone knows how much money they are making but find it hard to keep track of expenses. Am I right? Doing a budget will put your current financial situation into focus so that you can effectively plan for your future.
Step 3: Identify and write down your financial goals
These are goals that require money to achieve them. For each goal you identify, find out the monetary value so that it can be included in your budget. Examples of goals include buying a house, buying a car, reducing your debt, or even purchasing a phone. After identifying your goals, do some self-examination to find out how important these goals are to you. Based on how much future income you will have at your disposal are these goals attainable while still maintaining a budget surplus? Which goal has the highest success rate? If you are unable to answer these questions, this brings you to the next step…
Step 4: Seek professional assistance
You can usually start at the financial institution that holds the majority of your money or the bank where your primary current account is resident. Find out if they offer financial advice and don’t just settle for who you are arbitrarily paired with. When looking for a financial advisor choose carefully, seek out one who is passionate about the job and who can be empathetic to your financial issues. Such a person will be looking to add value to your life and not just do the bare minimum that will allow him or her to keep his job. Trust your intuition on this as choosing the wrong person may set you back and this may cost you precious time, while you can make back money there is nothing you can do to make back time. A good financial advisor will guide and educate you along the best paths to achieving financial stability or success based on what your goals are. He or she will fine tune your budget and align it with your attainable financial goals and let you know why and what changes are being made. If you are unable to seek professional help, try getting advice from a family member or a friend who has achieved similar financial goals to yours or who is financially stable.
I hope these tips prove to be helpful and impact your financial journey in a positive way or inspire you to start your journey. Until next time fam, walk good.5