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© Smart Money Tips,
www.smartmoneytips.com
The Seven-Step Approach
If you follow the steps outlined below, you will significantly improve your
money habits and increase your financial well-being. You will be less
stressed and therefore improve your physical and emotional well-being too.
Learn how to take control of your finances and get a clear understanding of
where you are financially.
Step 1 - What Are Your Money Habits? What money habits do you currently
have? What is your spending pattern? Take stock of where you are now and you
will start to understand what being in control means to you.
How does money or the lack of it affect your life? It's your decision as to
how you spend your money. If you are spending more than you earn - you have
a choice, carry on and get into debt or stop. Spend money for short-term
gain and gratification or spend your money on longer-term financial
stability and for your future goals. Every time you're tempted to spend
money on a new pair of shoes, a meal out or a new outfit - think! How much
more could that money be worth to you in the longer-term?
Step 2 - What Does Money Mean To You? What's stopping you from being
financially free? Understand where your beliefs and money behaviors come
from, so that you can address the underlying reasons for your bad habits and
start to put in place some new ones.
You probably have some beliefs about money you hold today that developed
through your childhood as you grew up. Beliefs based around what your
parents, society and religion taught you about money. The way your parents
dealt with money will affect the way you deal with your money.
Step 3 - Get Organized! Develop a crisp, clear picture of your expenses and
your income. Do this and you'll be in better shape and have a clear picture
of where you are.
The reason this is important is to work out whether you're earning enough to
meet your expenses. If not, you either need to a) cut your expenses or b)
you need to earn more money. The reason people get into debt or overspend is
because they are unaware of how much they actually need to earn.
Gather together all your salary slips, receipts, bank statements, credit
card statements, details of loan payments, mortgage, your money diary, etc.
Work out all your incomings and outgoings.
Step 4 - Reduce Your Outgoings. Look after the pennies, and the pounds will
look after themselves. Begin to look at ways you can reduce your outgoings
and start saving.
Even if you're getting by, you may be surprised at where your money goes and
how much you could save with a little effort and some careful thought. Look
at the items that cost you the most and see what you can do to reduce these
first.
Step 5 - Dealing With Debt - neither a borrower nor a debtor be. There's no
escaping the fact that we live in a consumer society where possessions
sometimes seem to be everything. This can lead us to accumulate things we
don't actually need and run up debts we can't afford. Credit is just another
form of debt. It may seem like an easy solution, 'Buy Now, Pay Later' but
how much do you really end up paying for that short-term pleasure?
If you're in debt, then get clear on what your debts are. How many debts do
you have? How much is your debt actually costing you? Decide that today is
the day you're going to take responsibility and you put yourself in a much
better position to do something about it. You're not the first and certainly
not the last person to be in debt. As soon as you start to bust your debt
you'll become more financially free.
Step 6 - Savings - speculate to accumulate. First create your Emergency Fund
and then start saving and investing for the long term. Even if you don't
have enough money to invest you can at least start saving. Set up an
automatic payment straight out of your account into a savings account.
Place it somewhere with easy access, preferably earning the highest rate of
interest available. Never under the mattress! Keep 10 percent of your savings
readily accessible for emergencies. As you build up your savings fund - move
it into a high-interest, long-term savings scheme. Make your money work for
you!
Your first savings pot should be your Emergency Fund. Aim to accumulate 3-6
months of your basic monthly outgoings that you need to survive. Should the
worst happen and you lose your job, go sick for a period of time or decide
to have a change of career, you will have a financial cushion to support
you.
Step 7 - Moving On - Good Habits. Keep yourself on track with some new money
habits.
- Get organized and put a structure in place to keep you financially in
control.
- Get all your regular, monthly expenses on direct debit - that way you
won't have to remember to pay bills, miss
a payment, get unnecessary charges
or risk getting cut off.
- Check how much you are paying for things on a regular basis. Check your
bank statement every month when it
comes in.
- Set aside a little time, every day, once a week or once a month to
organize your finances.
If you follow these seven steps you should start to feel more in control of
your money and be in a far better position financially. By reducing your
outgoings you will be able to start saving and investing in your future.
Money is the means to an end - it is not the be all and end all.
" ...if you have food in the refrigerator, clothes on your back, a roof
overhead, a place to sleep, money in the bank, in your wallet, and spare
change in a dish somewhere ... you are richer than 75% of this world."
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