If you have got to a point where you realise it is important to change your money habits, the first thing is to be grateful that you have acknowledged that. Just knowing that you need to be doing something about your finances is a very important step to have taken.
There might be many things which have caused you to feel that way, whether it’s the realisation that you are not going to be able to pay immediate bills, or whether you are just not ending up with as much in your savings account at the end of the year as you would have liked. Whatever the reason, here are some of the most important steps to take in order to transform your financial life.
- Sort out your debts
- Save an emergency fund
- Sell unwanted valuables
- Save for something nice
- Start investing
The very first thing to do is always to take a second look at your budget and see whether it might need reworking in some way or another. Budgets are often lacking because we forget about one or two costs that are actually significant, or because life just changes around us and the budget is no longer an accurate representation of reality.
If you fear that might have happened for you, the only thing to do about it is to take a look at your budget again and see where it might need to be altered. You should aim for one hundred percent honesty above all here – there is really no use in doing anything less than that, as it will come back to haunt you at some time anyway.
Make sure the budget accurately reflects your actual situation as best as it can, and then you can move on to the following steps knowing that you are doing so from a much better position.
If you have any debts, whatever size they might be, you should next work your way through them in a sensible order, to ensure that you are actually going to have paid them off as soon as possible. You should generally do this before putting money into savings or doing anything like that, as you are going to be much better off on the whole this way, compared to paying interest on debts while trying to save.
Put your debts in order of importance based on how much you are having to repay each month, and then work out a reasonable, realistic plan for paying it off. No matter how overwhelming it might seem, remember that it is always doable to pay off any amount of debt – and when you do, you are going to feel as though you are in such a better situation on the whole.
Nobody likes having debt over them, but by working at it diligently you will be able to rid yourself of any debt you might have, and therefore get to a much better financial position before too long. There are many steps you simply can’t take until you have done this, so make sure you do.
Now that you have looked at your budget and paid off all of your debts, your next goal should be to build up an emergency fund. To work out how much this should be, consider trying to put away enough money to live off should you end up in a dire situation where you have no money coming in at all. Bear in mind that during such a time, you would probably cut out a few expenses, perhaps even move in with friends and family and so on – so this will not simply be the amount you are currently paying out each month.
Top up the total of your absolute essentials and multiply it by three or four – you now have the figure you would need to have in order to have an emergency fund for three or four months. Work out how much you can reasonably put aside each month and how long it will take to reach the goal, and then you can see you have something reasonable to work for and start saving for.
This is a simple thing to do, but it really helps in saving more each month.
If you are struggling and you want to try and improve your financial wellbeing, you might want to look at whether you are sitting on some money that you could be cashing in. A good example is when you have lots of old clothing that you can sell on as it is still in good condition. Alternatively, you might have one or two valuable items that you are happy getting rid of and selling to the highest paying diamond buyer. Just doing that is going to give you a little cash injection which you can use to help turn things around.
After all that, you will finally be in a position to start saving for something enjoyable and fun – for example, a holiday, a new car, or anything else that might strike your fancy. Saving up for these kinds of items is really fun, and it can be an easy way to inspire you to put aside more money in general, so it’s worth it just for the sake of that. Save up for something you have always wanted to have, and watch as your savings account grows and grows.
Around this time, you might also want to start investing your money in one or two various places. Smart investment is all about keeping your options open, investing in many things at once to help diversify your portfolio, and having the patience to keep your money in there for the long-term. With good investment skills, you should be able to radically improve and transform your life much more than you might have ever thought possible, so this is something that you should be aware of and aim for as best as you can. It could make all the difference.
*This is not financial or investment advice. Remember to do your own research and speak to a professional advisor before parting with any money.