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5 Personal Finance Tips to Take Control of Your Wealth

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5 Personal Finance Tips to Take Control of Your Wealth

Guide

Timmy-

The best day to start getting your personal finances under control is today. Every day you wait, it makes it easier to put off. Then, it’s a year or two later without even realizing it.

Set Yourself Up for Success

The first way to take control of your finances is to invest some time in getting to know them better.

Make a point to know where you stand financially and where you want to be a year, five years, or ten. Once you start to think about the future, it’s easier to clear a path forward.

Create a financial system that you update monthly. It helps you stay aware of your money, free up time for other activities, and stay on track for your financial goals.

A lady taking control of her finances

Start with a Personal Inventory

Doing a personal financial review is a great way to take a snapshot of your assets, liabilities, and net worth. You can also review and modify any short or long term financial goals.

You want to see where are you are right now before you can make plans for tomorrow.

Make sure you have online accounts for each financial account you have: banking, loans, credit cards, and investments. Choose one day per month to update your personal finances, so you have an ongoing snapshot of your situation.

Identify where all of the sources of income and where the cash is going. Review how much debt you have, how much those debts cost (interest), and how much you have saved in investments.

Net worth is a list of all of your assets (investments, home, cars, real property, etc.) and a list of all your liabilities (debts). If the liabilities exceed the assets, you have a negative net worth.

Your personal finance inventory is also helpful when tax time rolls around. You’ll have a better idea for which deductions and credits you’ll qualify.

Stop the Bleeding

Make sure you have a complete overview of your debts. Make sure you know how much interest you pay for each line of credit or loan.

If it’s more than you can handle, take a two-part approach:

  • Find ways to reduce your liabilities. Whenever possible, stop adding to the debts. If you use credit cards and the balance keeps increasing, start spending cash only.
  • Find ways to increase your income. With the gig economy, finding extra work on the side has never been easier.

A couple taking control of their wealth through goal setting

Set Some Goals

What do you want want to accomplish this year financially?

  • Pay off a credit card
  • Make an extra mortgage payment each month
  • Refinance a loan
  • Create an emergency fund
  • Open an IRA

Whatever your goal for the year, make sure it’s attainable (realistic), and you take steps each month toward achieving it.

For example, if you want to pay off your credit card debt, maybe you want to open a new credit card account (if you have good credit) and transfer a balance. Many credit cards offer a 0% intro APR for 12-24 months. Although you’d pay a transfer fee, you can put your balance into stasis while paying down another account with a higher interest rate. Balance transferring can buy you some time without having to pay interest.

Create a Budget and Spending Plan

Now that you know where you stand on your finances, and have some goals in mind, set a budget.

Look closely at your monthly cash flow in and out and look for anything non-essential you can cut. It might be something comfortable like a music subscription or something significant, like changing your cell phone plan to a cheaper one.

Ideally, you want to know where every dollar goes each month.

Several budgeting tools are available, likeYNAB (You Need a Budget) or Mint can help you visualize your monthly cash flow.

Once you account for essential expenses, enact the plan for your first goal and set aside some savings.

Transform those new goals into essential bills, so you are not tempted to spend that allocated money.

Make it Automatic

Whether your goal is savings or just paying your bills on time, automate your financial management as much as possible.

For example, use your bank’s bill pay system to set up an automatic payment of bills. Even if you don’t know what your revolving credit card bill each month, make an estimate. Have your account pay before the due date so that you are never late on a payment. If it ends up being more, make an additional payment.

Another helpful automation is transferring money into your savings account regularly. You can set it up to withdraw money every week, two weeks, or month, depending on when you receive your pay. It makes savings a habit, so you begin to think of it as a bill and not expendable cash.

You Will Be Successful

Investing some time today in organizing your personal finances will pay dividends in the future.

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