THIS POST MAY CONTAIN AFFILIATE LINKS. PLEASE READ MY DISCLOSURE FOR MORE INFO.
You don’t need to be a wall street trader to know how to get your personal finances in order, and this is especially true in the this day and age with so much information out there at your disposal. In fact, planning your personal finances does not need to be as hard as you think. Follow this simple 4 step strategy to kick start your personal finances into order.
- Clear your debts-this is your first priority. After all, it doesn’t really make sense to put money away in a low interest earning savings account when you’re paying 20% on your credit cards. Nevertheless, there are 2 distinct methods to pay off debt-the debt snowball method and the debt avalanche method. In both cases, you pay the minimum payments on all your debts but pay extra money into your smaller debt first with the snowball method, in contrast to the avalanche method where you put more money into the debt with the highest interest rate. Once one debt is cleared, put all those payments towards the next one.
- Spend less than you earn-a fundamental rule of personal finance. Not abiding to this rule gets you into debt in the first place. Most people in this case don’t realise that if you borrow money on your credit card to spend, you’re eventually going to have to pay it back! At the end of the day, if you can’t afford it, don’t buy it. And if you desire to buy something, then you have to earn it! (see point 4).
- Set up a savings goal-the important thing here is to implement paying yourself first-this is the idea that the first thing you do when you receive your pay is to invest in yourself. An easy way to implement this is to calculate around 10% of your monthly pay then automatically put it into a savings account-after a few months this should become habit. And make sure that your savings goals are SMART i.e. specific, measurable, achievable, realistic and time bound.
- Focus on earning more income-by focusing on earning more income, you can a) pay off any existing debt if you have any and b) put the extra income towards your savings pot. In this day and age, there has never been a better time to earn more income, with the pillars of wealth lying within investing, starting your own business, real estate and the internet. Looking for ways to earn some more money? You may wish to check out this post here on ways to make extra money without giving up your day job. Having second thoughts about starting your own business? Check out this post here to give you that extra push.
What other methods are you using to take control of your personal finances?
Like this post? Please feel free to share on Facebook, Twitter or if you wish, you can save it to Pinterest to read later.