Everybody needs properly managed finances, whether or not you are extremely wealthy or financially comfortable. Properly managing your finances ensures that you don’t run into debt or go bankrupt. However, many people find this difficult to do effectively.
It may not be because of bad spending habits; there are a lot of things that contend for our financial resources. There’s always something new to buy and something else to pay for. Unforeseen expenses also lurk around the corner waiting to spend your money. Other times, some spend more than they need to and live without a saving culture.
A good financial lifestyle and habit not only help to improve your finances and quality of life, but also teach you to manage it well. If you don’t know where to begin, here are some ways you can take control of and improve your finances.
1. Set Defined Financial Goals
If you don’t know where you’re headed, you will hardly get there. When you know what your finances should look like in the bigger picture, then you can easily achieve them. The best way to achieve this is to take time to set defined financial goals.
In setting your goals, they have to be achievable. Setting unrealistic financial goals will not only cripple your finances, but also completely waste your time. A defined financial goal includes short-term and long-term goals, and each of these goals must not be abstract. They should be workable.
You can start with 1-year-long goals, then 5-years and slowly work your way to long-term goals. You may try out the S.M.A.R.T way of setting goals if you need help with setting yours. Don’t just say you will make X amount in 5 years–be specific about how you plan to do so. These are what you should pen down as a defined financial goal. Remember to take accounts when these goals come to an end or have been achieved.
2. Reduce Your Monthly Bills
It’s not unthinkable that you may have expenses that you need to settle every month. But have you sat down to ask yourself if all of these expenses are necessary? Many times, we make purchases and renew subscriptions we don’t actually need. If you’re looking to improve your finances, extravagant spending should become a thing of the past.
What you need to do is scour through your bills, purchases, subscription plans, packages and related things that you pay for every month. Be honest and sincere with yourself, which ones do you think are unnecessary for you? That magazine you subscribe to which you don’t even read should be scrapped. Insurance plans that are no longer useful should also be removed.
Find out whether the packages and plans you subscribe to still make good deals, or whether they are relevant to you. You will be surprised to see that you give a lot of money to these companies for little benefits. Also, check out other business competitors to see if they have better deals–it’s not being tight-fisted or frugal, it is being wise.
3. Invest and Buy Stocks
When it comes to the stock market, a lot of people tend to shy away because of the risks involved in stock buying. This is understandable, because nobody wants to lose money. But this is a false notion, as despite the risks involved in the stock market, there are many benefits to be gained from buying stocks. One of these is that you can make some passive income while you go about doing your other businesses.
A good place to begin earning passive returns from the stock market is to invest in index funds. Index funds are great because they very often outperform the majority of actively managed mutual funds. They are an inexpensive way to invest in a part of market stocks without putting in too much work, and still benefiting from long-term growth and returns of the stock market. You may refer to this as a passive investment style.
Whether or not index funds sound like a no-brainer, if you are trying to improve your finances in 2020, you must do proper research on what you are going to be investing in. Make sure that it is actually a low-cost product that matches what you are willing to invest.
4. Repay Debts as Soon as Possible
If strategizing about paying back your pending debts is not pertinent on your mind, then you need to revisit. Taking control of and improving your finances in 2020 means paying back your debts as soon as possible. It may not always be possible to immediately pay back, but what conscious steps are you making to see that you get it out of the way?
The faster you clear off your debts, the easier it becomes for you to look into some other financial impediments. Not to talk of the weight that this will take off your shoulders! Instead of relegating debt payments to the back of the line, move it forward. Quick payments of debt requires you to take note of your spending habits. Every purchase or payment you make has to be for important and vital things.
Cut down lavish spending excessively to enable you to pay back your debt in a shorter period. Once your debts are paid off, try to form the habit of not accumulating future debts. Keep tabs on your expenses and make sure that money going out will help you meet your defined financial goals at the end of its span.
5. Keep Financial Accounts
If you run a business, you must understand the importance of keeping accounts and invoicing. Poor accounting can run a business to the ground. There is a need for you to always monitor the expenditures going in and out of the business at all times. Poor accounting not only leads to debt, but it may also incur legal issues like tax evasion. This is a bad look for any company, and also puts your business at risk.
Invoice definition helps to curb financial mismanagement in a business. By keeping track of your finances via invoicing and excellent accounting, your finances can be sure to improve. Good accounting does not have to be extremely difficult or unpleasant. There are so many invoicing and accounting tools to choose from that are great for invoice definition. They are inexpensive and keep you on track to achieving your business’s financial goals.
Investing in any of these tools helps you prioritize your business’s financial obligations and make the most of your financial resources.
6. Save, Save, Save
Savings. Many people think of it as a big bother and often wonder why they have to do it. You never know when your money will be your ‘knight in shining armor.’ By saving, you are not doing yourself a disservice; instead, think of it as paying yourself first. It not only helps you grow your finances, but it also teaches you to manage your resources well.
Savings can be your fall-back plan if the going ever gets rough. It’s like an investment by which you reap the benefits later. To improve your finances, take out a portion of it (usually a fixed amount) and save. Many people choose to save monthly, but weekly or bi-weekly is fine too. No matter what it is, ensure that you save a portion of your earnings every month. Just like the saying goes, little drops of water make a mighty ocean.
7. Get an Additional Source of Income
If you have adhered to all of the above tips on improving your finances and you still are unable to get a firm grip on your expenditures, then it may be that your income is not enough to begin with. Knowing this, you may have to get an extra source of income. If your job is not paying well enough to support your expenditures, you need to get a higher paying job or do something extra to support your spending.
Side gigs may work well in this instance. There are many platforms that present an extra source of income for different fields and categories of people. Look for opportunities in the job market or on these platforms to help you make more money. Making more money may help to cushion the load of expenses more and provide you with financial stability.
Find an additional source of income that you can handle well alongside whatever you already do for a living. If you take on tasks that overshadow your job, you may end up losing it because of poor productivity.
Conclusion
Improving your finances means setting defined achievable financial goals, cutting down on excessive spending, taking into account the things that consume your money at any time, and cutting off debt-incurring bills.
Take charge of your finances by saving regularly. Hold yourself accountable for your spending and be honest with yourself. If you are able to do all this, you can sit back and watch as your finances take a turn for the better.
