If you’re looking for some strategies on how to improve your financial situation, then you’ll love this article.
If this year you have once again set yourself the goal of financial independence and multiplying the money on your account, just do it! Stop making declarations and get down to business.
While it is good to know – and possibly apply – ways to get rich quickly, start from absolute basics. Why? Because people’s general knowledge of finance still doesn’t impress.
We don’t learn that at school. We rarely learn at home. We don’t understand the mechanisms behind making money. We do not know the basic economic concepts and we do not have any habits to support wealth. When we have no money, we think, ” We cannot change it,” rather than treating it as an opportunity for profound change.
Knowledge of basic macroeconomic concepts and mechanisms is low in our country. Few economic terms somehow understood there have acquired the character of labels with strong emotional saturation in the general discourse.
We have an opinion on whether this is good or bad, although we do not understand the point very well. And we certainly do not understand interdependence. For example, many of us believe that inflation is bad and means expensive, and the source of it is that someone has raised prices. In one survey, half of the respondents agreed that we needed a law to regulate the level of inflation. One could even be tempted to claim that the criterion of linking the notions of economic is a sign of emotion, not an economic mechanism.
So what do we do? Focus on education! Since you did not learn about managing your own budget from home or schools, you should start learning on your own. It is not about definitions or learning new abstract concepts, but rather a change in behaviour and practice.
How To Improve Your Financial Situation:
1. Master the basics of financial education
Write down what you’ve got and count what it’s worth. Determine the value of your wealth – find out where you stand. And then divide it by your monthly maintenance costs. This way, you will know how many months you can keep out of work for your assets. It is not about getting rid of it or overeating it, but only about having such information and awareness, because it affects the activity.
It’s time to finally find out how much, how and why he comes out of his pocket every month. Where do the money disappear? Check it out!
Also check how much you earn and look for ways to make your revenue stream grow.
Managing your home budget
Clean up your finances and keep a detailed list of expenses. Take time to do this every day or at least once a week. Know and start implementing budgeting.
Reduce unnecessary expenses. Reduce costs where possible. Develop new, better habits that will protect your money.
What else can you make money on? Look for ways to generate more money.
Investing – learning and practice
Investing is building assets, that is, multiplying the money you accumulate. Money that lies at home or on a deposit does not work, and due to inflation it even loses its value. You can change this by investing. You will hire them to work if, for example, you buy real estate for rent, start a business, inject capital into other companies or start playing on the stock exchange. You can learn all this!
SEE ALSO: How To Save Money On Holiday: 31 Clever And Not So Obvious Tips
2. Love the budgeting
This method makes it easier to control expenses and manage money wisely. Divide your monthly cash flow into six key budgets (subaccounts) in the given proportions:
- Life – 55%.
- large expenses (holidays, large purchases) – 10%.
- Investments (financial freedom) – 10%.
- Education (personal development, financial intelligence) – 10%.
- Pleasure (fun) – 10%.
- Charity – 5%
In other words, out of every $100 you earn, spend $55 on food, housing, fees and so on. $10 – for various things that need to be bought extra during the year (trips, gadgets like new equipment, etc.) $10 – for asset creation. This budget is the most important, because it helps you to build your financial independence. When you are at the beginning of the road, when you have first and then higher income in your life, you can increase the amount of this budget at the expense of the others.
Similarly, when you are in serious financial trouble. Then spend up to 30% of your monthly income on investments for some time. $10 is money for education: books, trainings, $10 is money for any kind of entertainment (cinema, theatre, café, etc.) $5 is for some noble purpose (according to the principle that good returns).
3. The step towards savings
You can develop the habit of saving by participating in saver programmes offered by some banks. What is it about? These are automatic saving programs for regular daily transactions (e.g. with a debit card). They usually consist in rounding off transaction amounts and transferring surplus money to a specially designed savings account. If you are just working on your motivation to save regularly, this “unconscious self-saving” can be the first step in the right direction.
4. Before you start investing
Here is a list of questions you should ask yourself before you start trading:
- Do you know how much you earn and spend every month? If not, it is not yet time to invest!
- Is your income higher than your expenses? Do you know the amount of financial surplus you have at your disposal every month? If not, do not invest.
- Do you have any savings, e.g. $1,000, that will allow you to cover some small, unexpected and necessary expenses? 70% of us do not have such a safe amount. Therefore, first work it out – start saving – and do not invest yet.
- Do you have savings for which you could survive from three to six months? No? Like above. Work on your financial cushion, then invest.
- Do you have unpaid consumer loans, interest-bearing loans from friends or other debts? You shouldn’t start investing until you pay off your debts. Mortgage loans are an exception to this rule.
- Do you feel financially secure? Do you feel comfortable with the amount of easily accessible money in your accounts? If not, don’t start investing.
SEE ALSO: How To Make a Personal Budget & Stick To It During The Toughest Times
5. Practice financial intelligence
- Familiarize yourself with the numbers.
- Start watching economic programmes, listen more often to news about economics and finance, read magazines and articles on these topics.
- Go to the Internet portals of banks, insurance companies, investment funds.
- Start thinking about finances.
- Control finances.
- Read at least one book on personal finances.
- Count in memory.
6. Develop good habits
Enter the time for accounts (preferably half an hour a day) permanently into the calendar. Collect all documents, receipts, invoices and payment confirmations. Group them according to the established categories.
Sum up once a month all expenses in a category and once a year for all previous months. React and reduce costs when you see this opportunity.
Review all financial documents once a year, such as loan agreements, lease agreements, insurance, wills and more. Improve and optimize if you see a chance to act
Thank you for reading this article about how to improve your financial situation and I really hope that you take action my advice. I wish you good luck and I hope its contents have been a good help to you.