How to not end up poor or bankrupt this year.
How many of you can stand up and affirmatively say “I am completely financially secure”.
If your income source was let’s say…
“Unexpectedly cut off”, would you have enough money to sustain yourself for the next
two years or more?
It’s really unfortunate what’s happening in the world with the current ongoing pandemic.
But, if the pandemic extends for another year, where will you be financially?
These are the tough questions we need to ask ourselves every day!
If you found yourself uncertain with some of the answers to those questions, then you
better pay keen attention to what I’m going to tell you.
In fact, grab a pen and paper you will need to take notes.
10.
Analyze Your Current Financial Situation.
Here’s where the hard questions come in.
You need to be completely honest with yourself.
You need to list down exactly how much you earn, all your long term and short-term debt
and all expenses.
The very first step to financial freedom is financial consciousness.
Just like in business, where you should always know your numbers, in life you should be 100%
aware of all the money that comes in and goes out.
What you need to do is grab a book that will just be for your finances, or open a folder
on your computer to store this data.
Make sure you note down your true financial situation and be as honest as possible.
Once you have done this, you can then proceed to the next step.
9.
Evaluate Your Spending.
The next step is to look at what and where you spend your money on.
This step will require you to monitor your expenditure for the next three months.
And I know it sounds difficult and might be a bit boring, I get it, no one wants to keep
a record or much less, start noting down what they spend on every day for ninety days.
But, once you start and build momentum, believe it or not, it actually gets easier.
The first few weeks will be tiresome but after a while, it will be etched into your everyday
life, and soon you won’t be able to spend a dime without noting it down.
Once you have completed recording what you spend on for ninety days, you will then be
able to clearly identify unhealthy trends in your expenditure.
Perhaps you spend too much on coffee, or you unnecessarily buy shoes that you don’t need
or have a partner who takes up much of your income.
Look at each and every item on your spending list and ask yourself if it is really necessary,
and by necessary I mean, you can survive without it.
For example, you can definitely survive without a new phone this year or upgrading your Television,
but you can't survive without groceries.
Once you have evaluated everything on the list, create a new list with only the essentials,
this will be your new guide for spending.
And now here’s the caveat, you can’t spend anything above what is on the list, as a matter
of fact, the only alterations you can make is spending less.
Some steps could be taken at this point such as moving into a smaller home, skipping vacation,
selling your expensive car in exchange for a cheaper one and also selling other depreciating
assets such as your boat (if you own one) or any unnecessary items.
Also, I like the idea of applying Jay-Z's rule on money which says “if you can’t
buy it twice at a go, then you can’t afford it”.
Instead of saving up for a $40,000 car, why don’t you buy a $20,000 car and save the
rest or put the rest into a more useful fund.
Another priceless tip is to only splurge big on items or assets that appreciate in value.
Don’t buy the “creme de la crème” of TV’s, or a $3000 suit, it won’t make you
any money.
Instead consider saving your money and putting it somewhere else, such as maybe into your
retirement account.
8.
Create a Vision Board.
I know this is so cliché!
And you’ve probably heard this five million times already if not ten million.
But, everybody needs direction (consider it as your very own GPS) and that’s exactly
what a vision board will be for you.
It’s one of the single most important steps you can make towards improving your financial
status and wellbeing, and at the same time, it should help you avoid going off-track.
This vision board should highlight where you would want to be in the next two years, five
years and ten years.
Be as realistic as possible but don’t fall short on your vision.
If you want a ten-million-dollar home write it down there if you want your dream car put
it there if you want to have your dream life put it there.
You may not get it in a year or two, but it would be realistic to place a five year or
more timeline on it.
Once you have created one, make sure you place it where you can see it often, so that it
will constantly remind you of your dreams.
7.
Pay off Debts.
Now that you have a vision board, a spending guide, and you’re now fully aware of your
financial situation, you should go ahead and start paying your debts.
There are two approaches to this, you can first start by paying the less expensive debts
or alternatively you can start by tackling the more expensive debts first.
It all depends on who you are, and you have to be very self-aware here.
If you are one of those people who tend to need constant motivation, then you should
start with the less expensive debts first, because clearing them faster will give you
momentum and inspiration to continue.
If you are, however, self-motivated and you’re one of those people who once their mind is
set on something they have to accomplish it, then start with the big debts first.
So when deciding which debt to start paying-off first, you should consider the amount of the
loan and it’s interest rates.
Bigger loans with high-interest rates are the expensive loans, and smaller loans with
low-interest rates are the inexpensive ones.
So, when you are deciding which ones to start paying of first, it really depends on you
as an individual.
But, keep in mind debt isn’t entirely bad.
Debt is what determines your credit score.
If you don’t borrow money, you won’t have a criteria on which to rank your credit score,
so you may end up with a low credit score, which could inhibit you from borrowing in
the future.
The most important aspect of debt is how you manage it and what you use that money for.
If you are borrowing money to finance a house, that’s entirely fine because the house will
appreciate in value and offset the interest rate.
In short, don't borrow money to spend on things that don’t appreciate in value and always
stay up to date with your payments.
6.
Start Growing Your Savings Account.
Ensure at least 10% or even better 20% of your income goes to a savings account with
substantial returns.
It’s important for you to start saving as soon as it's possible.
As far as I know, saving is the best way to start building up a good reserve of money,
which you can later use to invest in other high R.O.I investments.
So one of the best things you can do for your finances is to set up automatic withdrawal
systems where once money hits your account it is immediately transferred to a savings
account.
If you are looking for financial peace of mind, then saving is absolutely crucial.
However, make sure your savings account is an interest-earning account.
Search for accounts with high interest rates so you get back more than what you put in.
5.
Increase Income Streams.
Look for ways to increase your income.
This may include taking up another job, starting a new business or doing freelancing gig over
the weekends.
The goal here is to find ways to supplement your current income.
You can’t afford to work less than ten hours a day unless you have an underlying medical
condition or a baby to take care of.
To be honest, people waste a lot time in their 20’s and 30’s, doing trivial things.
If you ask any elder person, they’ll tell you endless stories of how they wished they
worked harder and took more risk in their youth.
So working hard and saving as much as you can, is paramount for a happy life in your
lean years.
4.
Involve a Professional.
Once you have some savings and your expenses are in check, you can now involve a professional.
This step is not entirely necessary but it could potentially be a game-changer.
Getting general financial advice, from videos, books, or magazines is great, but a financial
professional will give you tailor-made advice specifically for your needs.
When seeking financial advisors, before you contact any of them, do a background check
and research their credibility, preferably on LinkedIn or talk to some of their previous
clients.
You should consider getting referrals from friends and family and picking someone in
your city, or in your local area.
3.
Get Proper Insurance.
The Affordable Care Act has granted high-quality healthcare for many Americans.
But, twenty-three states have not expanded their Medicaid programs yet to cover adults
within the poverty levels.
If your government won’t help you in acquiring high-quality medical care, then you better
get it yourself.
Approach different insurance companies and get quotes and features of the different plans.
Select the plan that covers the most illnesses.
While they may be slightly more expensive it will save you a lot of money in the future.
Also, if you own any property or assets ensure you get it insured.
Accidents such as fires could cripple your finances and get you in heavy debt if you
don’t have insurance.
Additionally get yourself a life policy, which will be paid to your dependents in case you
pass on or if you are unable to continue working for whatsoever reason.
2.
Change Your Mindset.
The game of handling and growing money is complicated.
It requires discipline, routines and strict measures.
It requires you to no longer view money in the same light.
Once you have acquired a foothold on your finances don’t let any silly mistakes set
you back.
You have to make permanent life changes.
Set up an emergency fund so that you don’t revert into the same situations as you were
in before.
Exercise self-control every single day and constantly research new opportunities to grow
your wealth.
And always remember, financial wellness begins in your mind!
1.
Improve Your Skill Set.
Invest in your education.
When you know more, you will be in a better position to apply for better jobs in better
positions or even do better for your business.
Also with a better skill-set, employers will find it difficult to retrench you.
Go to your HR department and find out if there are any education benefits within your organization,
you may find out your company could be willing to pay for that degree upgrade.
If not, set aside some money to learn new skills or take professional courses.
Attend seminars and networking events to grow your network.
They say “your network is your net worth” for a reason.
If you do all this, you won’t be in the same position in the next year or two.
Many people have changed their financial situation and even become financially secure by following
these simple rules.
Try them, then share your story in the comments once it works out for you.
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