The state of your finances is a big determinant of the type of life you will lead. This is simply because how much money you have determines your purchasing power – what you can or can’t afford. Nobody wants to live wondering how they would survive on a day-to-day basis, bothered about essentials such as food, clothing, and a roof over their heads. In this article we will learn about Your finances Are a MESS, This Is HOW TO FIX IT NOW.
For some, it is so that they can afford the best luxuries life has to offer; getting that piece of jewelry, buying that new gadget/ equipment, or even buying that new electric car. Do you have trouble buying that item you’ve always wanted? Are your finances a mess? Would you like to fix that?
Well, you are in luck because that’s exactly what we are here to help you with. Without further delay, let us jump into our journey to financial freedom! Welcome to Alux. If you don’t feel like reading the article here’s the video version:
BODY
If you want to fix your finances, the first thing you need to do is know where you stand financially. To do this, you need to identify your sources of income, whether it is your salary or other gigs that you earn from. More importantly, you need to know how much exactly you make from these income streams and where your money is going. Now, why is this important? It’s simple. Understanding this helps you reconcile your spending with your income to ensure that you can budget properly.
And guess what? This is the right way to audit your finances! Making a budget that works based on your income and following it is the first step to improving your financial situation.
Your budget is a plan on how you will spend your money, and remember if you fail to plan, you are kinda planning to fail.
Also, focusing on spending categories with the most relevance and dealing with quick wins is another step towards fixing your finances.
In the business world, this is called opportunity cost, and it involves spending on items based on their level of importance. For a lot of people, housing, child care, and transportation cover most of their expenses.
Given that you can’t exactly just up and leave your current housing arrangements, you can make plans towards it. Think about getting a roommate, or moving in with someone who needs one. If you have a family, you might want to consider moving into a smaller home. You could also reduce costs if you can move closer to your workplace. It might be more expensive in terms of housing, but it sure would save you a lot in the long run on transportation.
These quick wins don’t cost as much but can show results pretty quickly.
Reducing the number of times you order out, canceling unnecessary subscriptions, or taking a break from an expensive hobby doesn’t sound like much on their own, but when you combine them?
They amount to a good amount of money that could go into other things. Hey, this isn’t to be a cheapskate; it is just to help you keep your expenses in check.
Right direction
Another step in the right direction would be to find a way to increase your income. Many times people talk about making money from extra sources, but that might not be the first option to consider.
What if you could make much more money from your current job? We are pretty sure you are wondering how. Here’s the simple trick: ask for a raise. And this works even better if you haven’t gotten one in a while. Remember that it helps if you are good at your job and can communicate with your employer effectively.
Adding a few new skills to your portfolio is another sure way to get your boss to consider giving you a raise; you have more skills now, so why not? If you are self-employed, something to consider would be increasing your rates. Try not to sell your time by charging hourly, instead charge for the results you deliver.
Let’s take an example; you build apps and you’re working on a new finance app for a client. Most times, they don’t care how many hours you actively work on doing that, they just want their app done.
This way, you can earn more while working fewer hours without being worried about being charged hourly. But right before starting the project, think of the ways and avenues this app can make money for the client, and draw a fee based on that.
increased your source
After you’ve increased your source of income, you can now try to diversify your sources of income. If there is any lesson to take from the COVID-19 pandemic, it is that there are several ways we can make money. The first thing to do here is to leverage on skills you already have or even develop new skills to help you. Why is this necessary?
Well, you could easily start a side business based on your existing skills. If you have marketing skills, you could reach out to small businesses and startups to help them promote their businesses.
You can equally venture into other things such as selling products online, writing or even creating courses or webinars with that knowledge you have. Still, in the spirit of making more money, there is also this other thing you could do, which is investing! investing is a sure passive income that makes money for you while you aren’t even there!
Sounds like a steal?
Of course! Interestingly, there are a bunch of investing opportunities available to starters and experts in the investment world.
But here’s what we advise; don’t get too excited about an investment deal, instead do your own research about it and speak with a financial advisor before throwing your money in.
Now that you have a good grasp of what you earn and how much you spend, you must set financial goals for your future.
You need to have specific goals for the short term and in the long run. Your short-term goals could be saving for a car, a house, a vacation, a new business or even starting an emergency fund.
Your long-term goals are those that are 5 to 20 years away, such as a college fund for your kids, or a retirement plan, it is equally important that you still break them down into shorter-term goals.
For instance, if you plan to start a company in 10 years, you would need to start calculating today how much you would need for that goal to be achieved.
You need to start taking into account how much you have at the moment and how much you will need to save to meet your target. This goes for both short-term and long-term goals.
Just remember to set SMART goals – Specific, Measurable, Attainable, Relevant, and Time-bound, and we can assure you that you’d be fine.
Life, as we know iti, is full of surprises and there is no way to sugarcoat this, which is why everyone needs to have an emergency fund.
Don’t dismiss this, it is extra important to getting your finances on track. Wondering why an emergency fund is so important? Unexpected situations like losing your job, a fire at your house or some medical problem, or a pandemic could happen.
pre-authorized payments
This could imply, setting up pre-authorized payments for your bills, pre-authorized transfers, or automating how much you contribute to your investment accounts. Through automation, you save yourself time and the stress that comes with checking your bills and paying them on a month-to-month basis.
If you want to meet your goals, then automating your finances is a good place to start. Moving forward, it is almost impossible to improve your financial situation if you are swimming in debt. So, settling your debts should definitely be at the top of your financial goals.
Commit to paying off your debts, especially the ones that have higher interest rates. Now, we know this may sound like it will take an awful lot to do, but as you make more money, and reduce the expenses you incur on a month-to-month basis, you can easily use the extra cash to settle your debts.
Being debt free is very important in your journey to financial freedom. And talking about credits, they can be a really useful tool if used right.
From helping you acquire a house, to buying a car and other properties, it is a vital part of our financial lives. But here’s the thing with credit, it is often misused — it’s either financing a lifestyle you can’t afford or generally living above your means.
Here’s one simple trick we’ve learnt about credit: if you cannot pay for whatever it is in cash, then you simply cannot afford it. Another lesson: if you cannot pay for it twice, then you also cannot afford it!
Also, it is vital that you know your net worth. Your net worth is that amount that accounts for the value of all your assets, minus all your liabilities.
financial position
Doing this is a strong test of your financial position, as it shows you where you are financially, compared to just tracking your income. Monitoring your net worth over some time helps you measure your financial progress objectively and helps you know if you are on the right path.
Not only does your net worth tell you where you are currently, it helps to show you areas you need to make improvements on.
Simply put, you want to increase your net worth, and this is achieved by increasing your assets or reducing your debts, or even both!
But fixing your finances is a little deeper than everything we mentioned, it also means you must develop and educate yourself as much as possible!
Carefully research, read books, journals or blog posts. Follow the investment and stock markets. Know the economic situation of your country. There is a comfort that knowledge brings and that translates to even your financial situation.
You will certainly be able to sleep better at night when you’re financially literate, up to speed with your finances, and even making efforts to make it better.
Most importantly, as an Aluxer, you must have a constant hunger for excellence, and this means you should make a conscious effort to up your skills.
Take courses or get certifications in areas you think would have a positive impact on your job or career! Treat upskilling as an investment, not an expense. If it will get you more income over time, why not?
If you haven’t already, you also need to get insurance. At this point, not having insurance is simply a bad decision! It is a great way to protect yourself, your family and your assets in the events of an emergency or accident.
Phew!
That was some journey. We hope this video helps you get a better understanding of your finances, and saves you from any financial mess that could spring up! And remember, always seek help from a professional financial advisor at the end of the day. These guys are trained to put your finances back on track, so a quick chat might be everything you need! Do you have some smart financial tips for us that have worked for you in the past? We’d like to know about it in the comments section! Thanks for hanging around. See you next time!
