Effective financial management requires time and sacrifice. So, if you can have the mind set of taking care of your finances, your finances will then take care of you.
Decision making is the direct influencer here. Understanding why you buy what you buy, and what gratification you get from it is important. Key decisions directly influence your future. So the earlier you begin planning how to spend your money, and the kinds of debts you assume and how much you save, the better.
So what steps should you take to better organize your finances in 2019?
1. Evaluate Your Financial Decisions
First, you can’t organize if you don’t know what drives you to spend. Here are some key questions you should ask:
- Are your savings long-term? Are you thinking about future retirement security? Or is your entire savings plan geared towards the next vacation?
- Do you assume debt for an investment plan? Or just take loans for self-gratification; for a new car or a new watch?
- What influences your financial decisions the most, your own personal needs, your spouse, your kids, fun with your friends?
Most people fail to plan due to the impulse factor. They purchase items they don’t need, they sign up for gym memberships that incur monthly automatic payments – but they never actually go to the gym. Understanding the social, physical, and emotional factors that influence your finances and decision making is the first big step towards financial responsibility.
2. Get an Accordion Folder!!
It’s not just about taxes and returns, accordion folders can be a great way to organize anything from your receipts, to your bills, and overall expenditure. It is especially useful if you want to keep a close eye on how you spend, and why. Also, when you have a well-organized system, you will be able to find important documents without having to turn your house upside down.
Accordion folders are also a way to keep a scorecard. Keeping all your important documents on-hand will allow you see the kind of progress you’re making over the course of the year.
3. Get Your Debt In Check
Financial assistance can be a great resource, if you use it the right way. For example using payday loans without a specific action plan is the equivalent to shooting yourself in the foot. Make decisions that make financial sense.
- Check your consumer debts and weigh them against your Net income. Ensure you don’t run up new charges. Check your purchases – keep them within the 20% limit.
- If it’s possible, try to get a second job, or overtime to supplement the lost income, but only if necessary.
Also, and perhaps more importantly, know the difference between good and bad debt.
- Bad debt: Debt that you incur to purchase something that has no appreciative value. It will never cost more than what it costs when you buy it.
- Good debt: Debt incurred and used as leverage towards improved value in future.
4. Find Spending Leaks
The beauty of planning is identifying problem areas. Once you have a clear view of how you spend, you’ll see a pattern of areas where the spending was frivolous. That’s a spending leak. Changing a few bad habits, once identified can save you a lot of money that you can re-direct to something more constructive.
5. Save and Invest!!!
Lastly, it’s never too early to start saving and investing for the future. If you can find someone who is a specialist within managing finances, this could help you win some cool investment advice.