Sometimes it is easy to get lost in the simple detail of money management. Sometimes we forget the big picture. If you have resolved to take charge of your finances, then this article is for you. It is loaded with tips and resources for making the most of your money.
Here then are the simple but effective steps to take charge of your finances.
Step#1: Set Financial Goals
The road to riches is paved with goals. If you don’t know why you are doing this – why you are making sacrifices, why you are working really hard – it is very easy to fail. But if u set goals, they can serve as a roadmap when things get tough. Times you have to make a decision, your goals can help you stay focused on what’s important.
For your goal to be effective, you have to make them personal. They have to mean something to you. For example, your goal might be to save money for travel, pay up long term debts etc. Be prepared for setbacks. You are not going to meet your without mistakes. Stuff happens. The best way to deal with problem is to have plans before they occur.
Step#2: Track Every Penny you spend
It is advisable to track every penny that comes into and goes out of your life. This is the best way to become aware of how much money actually comes in and goes out. This is the step that makes the biggest impact. It doesn’t matter how you track your spending, the most import thing is to just do it.
• You can use cash notebook
• You can use online tool
• You can use a piece of software
Whichever method you choose, stick with it. Make it a habit. Don’t fudge the numbers. Record your transactions as they occur to you wouldn’t have to forget.
Step#3: Develop a budget
After you’ve tracked your expenses for a few weeks or months, use the data you have recorded to develop a budget. Budget is one thing that set wealthy apart from the rest. Most rich people keep a budget. Many people fail to budget for many reasons: it is boring, most people don’t think they need it, or they just don’t know how. But this simple act can provide a roadmap for your money.
Spend less that you earn. This is the basic money skill. It is common sense, yet most people never learn to do it. Only when you spend less that you earn can you build wealth. This is easy to do only when you track your spending and develop a budget.
Step#4: Earn Extra Income
You can meet a lot of your financial goals by reducing spending and using the right tools. But nothing can propel your progress like a boost in income. Here are ways you can get extra money:
• Ask for a raise.
• Switch employers. Not every employer is able or willing to offer a raise, even when they are merited. If you find yourself in this situation consider finding a job.
• Take a second job
• Use your hobbies
Step#5: Fund your Retirement
If you are young, you probably don’t see a reason you need to start a retirement account. You are wrong. No matter your age now is the time to start saving for retirement. The extraordinary power of compound interest favors the young in a big way.
Taking charge of your finances can be challenging. But it doesn’t have to be that way. One effective way is to take a vacation day from work. Take this day to finally set up yourself and you will see yourself walking down that road to financial freedom.