How to Get a Grip of Your Financial Life in more ways than one
Right now, would be a great time for anyone to get their finances in order. With everything going on with the elections, people have shifted harder than ever in the ways we operate day-to-day with our work and our personal finances.
Now, is a great moment in time to go back to the drawing board and get some improvements going.
In working within the banking industry, I learned a little bit about how people manage their personal finances. While working in this profession, I picked up a few things that I knew I immediately needed to implement. On the flip-side, I also picked up somethings that I needed to steer free from.
Here are 11 simple ways you can improve your over all personal financial situation over time:
Take Inventory
Go back to the drawing board. Clear it, clean it, and start taking inventory on your entire financial picture.
Working as a personal banker, many of my clients don’t like to face the darkness that looms over their finances. They know things are not good, but they still insist on not talking about it. That’s a problem. It’s actually THE problem. If you really want to improve your personal finances, you can’t be afraid to call things for what they are.
Be Mindful
Making profound changes requires for you to keep things top of mind. It needs to become second nature to you, and the only way to do that is through repetition. Taking control of your personal finances is no different. You will need to change the ways you view your money and your spending habits. You will need to slow down on the spending and be mindful towards where you choose to use your money.
Keep a Spending Journal
Keeping a spending journal is a great way to figure out where your money is going. If you are a tech geek like me, or just use a lot of technology you probably thought about using some sort of app. Although this would work flawlessly, carrying a spending journal is what I would go with. The act of carrying a small pad with you and jotting down each and every purchase you make will keep you mindful. After a month you should be able to pick up exactly where your money is going and how to avoid it.
Organize Your Financial Responsibilities
Once you have taken inventory of your entire financial picture, and have faced the demons — its time to improve. You want to organize all of your financial responsibilities. You want to jot down payment dates and make sure that every responsibility on your end is planned for and executed flawlessly. This creates a positive history and will be the road that leads towards improving your personal finances.
Get Your Federal Loans Organized
If you have student loans out there, you are going to want to get those organized as soon as possible. Student loans can often end up separated, thus making it a bit more complicated to keep track. Do your due diligence and ensure yourself that you know exactly how much you owe, what interest is being calculated and when you need to make your payments. Leaving this off to the side is something that will bring you trouble later on.
Pay off Debt
Everyone has their own take on handling debt. I personally despise it and if I could go back in time and educate myself on why this is so crucial, I would in a heartbeat.
Part of taking inventory of your finances is to look at your debts. You want to identify how much money you owe and who you owe that money back to. Once you have identified that it’s time to start working towards paying off any existing debts that you have other than your home, if you do own one.
An effective strategy to follow is the “snowball effect.” This strategy works on tackling your smallest debts first slowly working up to your largest debts. As you pay off one small debt, you now have some free’d up cashflow. Essentially, taking that money that you would have paid otherwise to your old debt, and throw it towards the next debt on your list. Little by little if followed properly, you can tackle your debts rather quickly and efficiently.
Don’t Carry Balances on Your Credit Cards
As a rookie in the world of personal finance, you start to spend without knowing the consequences. This catches up to you later in life bringing more difficulty towards your financial confidence. Credit Cards are systematically designed to keep you paying monthly balances. In other words, they want you to stay in debt.
If you are not mindful, you can easily end up in their sticky web. The most successful clients I advised, where the ones who handled their credit cards with care and avoided carrying balances. Carrying balances on your credit cards keeps you having to pay a ridiculously high interest and requires a monthly payment. That monthly payment can go towards your savings instead. Making you money, instead of losing you money. Discipline yourself with credit cards as early on as you can.
Insure yourself against financial disaster
If you are working and have a family you need to make sure that you are properly insured. You want to insure yourself agains financial ruin. A solid health insurance should be in place. Just in case there are complications, you don’t bankrupt your family. Employers pay part of your health insurance. You want to know how much your coverage is and the extent of that coverage. You also want to know what your deductible is. If you are ever in a position to pay out of pocket, you want to know beforehand how much that would be.
Start Contributing to a Tax Favored Retirement Account
The government offers tax sheltered vehicles for you to build and grow your wealth. These things need to be taken advantage of as soon as possible in order to get maximum benefits.
If you are employed by a company that offers you a 401K you should dive right in. Some employers even match, which then contributes to faster growth of funds for you.
If you don’t work for an employer who offers a 401K plan, you can open an individual retirement account (IRA). The goal is to get started on this as young as possible. However, if you are well into your career and have not made moves like these yet, don’t worry. There is always time to improve your personal finances.
Find out Your Credit Score & Improve It
A credit score is basically a number that tells lenders whether or not you are a good risk. Think of your credit as your financial GPA. There are three major credit bureaus: Equifax, Trans Union, and Experian. You are eligible for 1 free credit report each year. Head over to Annual Credit Report and request yours if you have no clue where you stand.
Even if you knew exactly what you are doing, this would be a great practice. There is a ton of fraud going on out there and you never know what may be lingering on your credit report that may not belong to you. Slowly, make improvements to improve your credit score by paying off debt and keeping your monthly payment history in line.
The biggest components of credit are: credit payment history, followed by utilization (how much debt you are actively carrying in balances) and over all history. Too many of my clients didn’t take their credit serious, and it ended up costing them financial opportunities later down the line.
Make Savings a Part of Your Budget
Savings is what is going to help you secure your financial future. It is also going to help you improve your personal finances if you stick to it properly. You may be doing great now, but in 1 year you don’t know where you will be. The point of your savings is to protect you and back you in circumstances of financial difficulty.
Savings requires a paradigm shift. As a rookie, you learn that you should save your money. That requires taking some money and putting it aside when you have. A better way to look at it, is to factor your savings into your budget. It then becomes a requirement not an option.
Aim to save at least 15% of your overall take-home pay each month. It’s critical to think of your savings as a fixed monthly expense. Just like your car payment or rent. Include both savings & retirement savings in that 15% budget.
Final Note
We are going through a transitional period here in life right now. Things are changing all around us. They always have been and they always will. With that being said, whether you are in the beginning phases of your voyage with money or you are 30 years deep into your financial run — it doesn’t matter.
Take a moment to go over your financial picture and look for ways that you can make big strides towards improving your personal finances. It’s never too late no matter what anyone tells you. And, it’s never too early to start either. 😉
Hope this helps!
