Organizing your finances puts you in a better position to accomplish your wealth objectives. Get started improving your financial wealth with these six tips:
1. Understand your financial standing and assess it regularly
To understand how financially organized you are and whether you are on track to achieve your financial goals, you must regularly check-in on your current scenario. It’s important that you review your credit score often, know where to find your financial accounts and evaluate your recent months spending habits. Recognize that your financial standing is constantly changing and ask yourself, has your income changed? Or your debt? Are you able to save more or less than you would like to? These steps will provide clarity on your current financial standing and help you establish whether you need to maintain, reprioritize or reassess your goals.
2. Build a budget
The key to accumulating wealth over time – save more, spend less. Building a budget for yourself, aligning your spending with your goals and saving now for large purchases in the future will leave you with more financial freedom long-term and position you to achieve financial prosperity.
3. Diminish your debt
Debt can prevent you from enjoying financial freedom, especially if it is high interest bearing. Though debt is overwhelming, with a little time and discipline, you can take steps to get out of it. Here are a few examples of strategies you can try:
- The snowball method: Pay minimums on all balances except the smallest balance regardless of interest rate; once the smallest debt is paid off, move to the next smallest debt, creating a “snowball” effect until all your debt is clear.
- The avalanche method: Pay down the debt with the highest interest rate most aggressively, while paying minimums on your other accounts; the goal is to create an “avalanche” effect, saving you money over time in reduced interest.
4. Pay your future self
It’s crucial to allocate a portion of your monthly budget for contributions towards your retirement or other savings accounts. The earlier you start saving, the better. To ensure that your long-term goals are on track to provide you with financial freedom in the future, prioritize this payment and make it your first payment of each month. This will help you align your expenses to avoid discretionary spending. It’s okay to start with small investments – it’s better to start small and revise your budget as necessary to increase contributions overtime.
5. Prepare a “rainy-day” fund
No matter what your age or financial standing is, an emergency fund is necessary. Sudden medical emergencies, car/home repairs, etc. are followed by large bills to pay. Setting aside money into a savings account that is dedicated specifically towards unexpected expenses will protect you from a financial set back. An emergency fund is prudent to ensure your financial wellness is on track and will prevent you from building additional debt or using money from your retirement or other accounts.
6. Prepare for the event of your death or disability
In the event of your death or disability, you want to ensure that your assets and loved ones are protected. Two things that are essential towards accomplishing this are reviewing your insurance policies regularly and preparing a will. Your financial status and your assets are constantly changing and it’s important to review your insurance policies often to establish if any changes need to be made before an event like such occurs. If you don’t already have a will, you should consider creating one. A will outlines your wishes for the distribution of your assets and without it, there is no guarantee that your assets and loved ones will be protected. Similar to reviewing your insurance, it’s smart to review your will every once in a while, especially after large purchases, to make any necessary updates.