3 steps to managing your finances
Being able to effectively managing your finances can make the difference between living a relatively stress free life where you have no major money concerns or having to constantly look over your shoulder and worry if you’ll have enough money left over to pay the bills.
Creating a blueprint
Careful planning is the most important aspect of managing your personal finances so it’s essential that you create a blueprint that reflects your lifestyle, values and interests. We all need money for shelter, food and clothing but beyond these three life essentials there is an infinite number of ways in which we can spend money and it’s important that you prioritise where your money is going to be spent. Once you’re in a position to cover the essentials you can then begin to spend your money elsewhere but not before your priorities have been met.
There are three key reasons why this approach is so effective:
- It helps you fully understand what your unique values are, allowing you to plan more effectively.
- It highlights potential problem areas
- It acts as a motivator to help you take the necessary measures to succeed
Identifying problem areas
When asked, most people with financial worries say that their biggest problem as far as they’re concerned is not having enough money. The difficulty here is that they may struggle to identify the exact reasons for not having enough money. One common problem is a lack of discipline when it comes to spending which comes back to a previous point about setting out financial priorities. Impulsive spending can be classed as any purchase you make that isn’t budgeted for or isn’t something that you needed. One effective way to help you curb impulsive spending is to avoid using credit cards as these can be incredibly damming to those who struggle to manage financial commitments.
Creating short, mid and long-term goals
Setting out your goals in a realistic time frame is a proven way to improve your personal finances and working towards the things you value in life. The key here is to find a balance between addressing the most pressing concerns and not overstretching yourself. Of all the aspects of managing your personal finances this is the one that requires the most planning, time and effort. In order to make this a success it’s advisable to breakdown each individual goals into smaller, more manageable stages so you can see exactly how much money is going towards achieving each of your goals.
A final thought
As with most things in life, balance and moderation are the keys and it is no different when it comes to personal finance. Your aim should be to prioritise your finances in line with your aspirations and create an effective and manageable plan to help you achieve both your personal and financial goals.
Jay-Jay Stephens writes about a number of areas relating to personal finance including how professional wealth management can help you secure your financial future.