How you manage your finances is incredibly important when you are trying to gain financial independence and freedom. I think we all wish we had a Fairy God Mother that would just grant us all the money in the world or a rich aunt that decides to leave you her million dollar estate when she passes on however in real life, these things don’t happen, well not that often at least and that why you need to manage your finances correctly in order to get the most out of your money and plan for the financial future you want.
In this day and age, money is important and we need money in order to survive, pay for those flights to that dream destination or buy that dream home that you have been dreaming about forever. Deciding to take control of your finances needs to be an everyday decision to be wiser with your money and also making sure you are planning for your financial future regardless of the fact that you are 21 and feel like you are never going to be 50.
So how can you take the first steps towards managing your finance successfully?
Establish what your goals are for your finances
Ask yourself these questions:
- Where do you want to be financially?
- Are you wanting financial freedom and financial stability?
- Where do you see yourself financially in a year?
Taking the time to ask yourself these important questions is an important step towards managing your finances successfully. How you manage your finances are going to impact a large part of your life and you need to ensure you are doing everything you can to reach your financial goals.
Once you have done this, you need to make sure you are prioritizing your financial goals. You need to put them first. Why not list your financial goals in the order that you want to achieve them. By doing this it will make planning a whole lot easier.
Create a plan for your finances
Now that you have taken the time to write down what you want for your finances, its time to create a plan on how you can achieve those goals. Having a financial plan is absolutely essential to reaching your financial goals.
Start with a simple plan of gaining control of your budget, creating a spending plan, savings plan and getting out of debt. I also want you to think about those long-term goals like planning for retirement. I don’t think many people realize how important planning for your retirement really is. You can plan for your retirement while working towards your other financial goals, like planning that trip to an exotic destination or paying off your car in the next 2 years. This is where your planning comes in. Its all about taking the time to create a financial plan that will make the path clear on how you can reach your long-term and short-term financial goals.
Always stick to your budget
Sticking to your budget is key to reaching your financial goals. Having a budget helps you decide how you spend your money. Tell me, how often have you gotten paid and 5 days later you are sitting with no money in your account wondering where all your money has gone? Don’t worry, its happened to me as well. So if this has happened you, use it as a sign that you need a budget that allows you to tell your money where to go and not the other way around.
I know many people hate budgeting because it’s daunting to actually sit and realize that you have been managing your money completely wrong for so many years but once you start implementing a budget into your monthly routine after you have been paid, you will feel a lot more in control. Remember, you have worked hard for the money you earn and you need to ensure you are in control of where your money goes and how you spend it.
You are in control of your financial goals and the only way you can reach those financial milestones is by being disciplined, budgeting and sticking to your financial plan.
Work towards getting out of debt
How much of your salary goes to debt like paying off your clothing account, your car or credit card? Just think about all the extra money you would have if you didn’t have to pay off those accounts on a monthly basis. Make getting out of debt a priority. Create a plan to pay off debt as soon as possible. If you can’t control your spending on your Foschini Account then give that Foschini card to a friend to keep for you until you have paid it off or cut it up altogether. My mom always says ”Cash is King” and if you can’t afford to pay for it with cash, then you simply cannot afford it.
So what can you do to help you get out of debt
- Stop spending on that Foschini Account and Credit Card
- While you are making minimum payments on all your debt, pay off the smallest debt first and once that debt has been settled move that money into paying off another debt. Create this snowball effect and you will soon find yourself with a whole lot of extra cash that you can save.
- Look for things you can cut out of your budget that will help increase your debt payments. Do you really need DSTV when you hardly watch TV as it is?
Create a savings plan and start paying yourself first
Saving should be done first. I am a firm believer of ”paying yourself first” and by this, I mean immediately moving money into my savings account the moment my salary comes into my account. This also means ensuring my retirement annuity and emergency fund savings comes off first before I start dishing out money and spending money.
Saving for the future is incredibly important. We don’t know what tomorrow brings and being prepared is the best way to combat those awful obstacles that life throws at us. Imagine you are retrenched tomorrow and all of a sudden you are no longer getting that monthly salary every month to pay your rent or your car. If you have an emergency fund that you have been contributing towards every month, you should have 6-month car payments or rent sorted until you can find another job. Always try and be as prepared as possible.
Make managing your finances a priority. Make it a non-negotiable. Hold yourself accountable. You are in charge of the life you want to live and you are in charge of the amount of financial freedom you have. Take control of your life and finances and you will feel like a weight has been lifted off your shoulders.