Wouldn’t it be nice if there was a magic formula or one easy trick that made it so you never had to worry about money again? If you’re tired of constantly being stressed out about money, then maybe it’s time to get a hold on your personal finances. There are five keys that can help you get control of your finances. Follow these five steps consistently, and your financial problems will start to diminish–along with the financial stress that goes along with them.
1. Start with Goals
The first thing you should do is to write specific goals about what you want to do with your life and your money. Finances can affect many different areas of your life. Your goal to travel the world affects how you will plan your finances. Your goal to retire early is dependent on how well you handle your finances now. Once you have written down your financial goals, you need to prioritize them. This ensures that you are paying attention to the ones that are most important to you. You can also list them in the order you want to achieve them, but remember for a long-term goal like saving for retirement, you should be working towards it while also working on your other goals.
2. Create a Plan
A financial plan is absolutely essential in helping you reach your financial goals. The plan should have multiple steps. A sample plan would include getting control of your budget, creating a spending plan, then getting out of debt.
Once you’ve accomplished these three things, you’ve freed up some major cash, and the money you free up from your debt payments can be used to reaching these goals.
At this point, you should decide what priorities are the most important to you. Keep steadily working toward your long-term retirement goals, but also start to focus on the most important goals you have set for yourself. Your goals, along with an emergency fund, will help you stop making financial decisions based on fear and help you get control of your situation.
3. Stick to Your Budget
Your budget is one of the biggest tools that will help you succeed financially. It allows you to create a spending plan so you can focus your money in a way that will help you to reach your goals.
A budget lets you decide how to spend your money. Without the plan, you may spend your money on things that are not important to you, but you want in the moment, and then wonder why you are never reaching the financial milestones you have set for yourself.
A few things to keep in mind: Even after you are out of debt, you still need to have a budget. It is easy to spend more than you make, and if you stop tracking your spending, you could slide back into debt.
4. Get Out of Debt
Debt is a huge obstacle to reaching your financial goals, so eliminating it should be a priority. Set up a debt elimination plan, which will help you pay it off more quickly. While making minimum payments on all your debt, you focus extra money on one debt at a time and then move all the money you were paying on the first debt to the next debt once the first is paid off, creating a “snowball effect.”
Once you are out of debt, you need to make a commitment to stay out of debt. Stop carrying your credit cards around with you, and save up an emergency fund to cover unexpected expenses so you do not need to turn to a credit card to cover them.
5. Don’t Be Afraid to Ask for Advice
Once you are ready to grow your wealth and begin investing, you should speak to a financial planner to help you make your investment decisions. A good advisor will share the risks involved in each investment, and help you find products that match your comfort level while helping you work towards your goals as quickly as possible. A financial planner can also help you with your budget, which is another plus.
Remember that investing is a long-term strategy to building wealth.