We are overhearing speeches about budgeting; there are now hundreds of budgeting techniques. We are becoming overwhelmed with investing, savings, and accounting software; everyone seems lost trying to get in line.
Do not worry; in this article, we will set everything straight to have peace of mind when it comes to your finances.
Why Is It Important To Get Your Finances In Order?
Similarly, having your house in order save you time and give you peace of mind… getting your finances in order will do the same. If you are trying to reach financial wellness, you won’t be able to do so if you haven’t figured out the right way to your finances.
It is very easy to set your finances straight; you should focus on one thing at a time.
Be Real With Your Numbers
It is important to get personal with your numbers (it sounds weird, I know). Let me explain… you do not need to look at every bill from the past five years, but you should at least look at your recent ones. Bills and account statements from the past two months would be great to start with. When you are done observing and reading, you will find a pattern in your expenses; it may go unnoticed first, so you must focus.
Make a list of everything you spend, separated into two categories; needs and wants. Examples of needs are food and shelter. Knowing how much money you spend on your needs will help you approximate the amount of money you need in your emergency fund.
For example, if you spend $ 100 on shelter and food monthly, you will want to have this sum in your bank account multiplied by at least 6, so you will want to have at least $ 600. Therefore, if you ever lose your job, you will be secure for at least six months, which will give you enough time to find another job.
When you are done, you want to find a way to track your spending. There are different ways to track your spending; envelope system, phone application or on a notebook. You choose what you please.
When you have chosen your method of tracking your spending, you will have to create a spending plan to know what you will spend your money and save, even before you get paid.
To be able to create a spending plan, you will have to know your goals. It is easier whenever you set goals and work towards them; I recommend that you set little goals, weekly goals, for example.
When you decide on how much you want to save, you will work on healthy saving habits. I can make a flexible saving, for months that you need to spend a little more.
It is difficult to reach a goal on your own; if you find a financial partner, it will be easier for you to reach your goals as you can motivate each other in the process. You can do it with your partner, spouse or you can find a financial coach.
Protect Your Finances
Once you get your finances in order, you will have to protect them.
You will need to check your health insurance; did you know that the biggest debts Americans face after the student loans are medical debt? Making sure you have good medical insurance will save you from being bankrupt during unexpected accidents.
The best way to preserve your money after your death, to make sure that not all your savings go to the viewing and burial ceremony, is to get good life insurance.
Disability insurance will help you financially if you are unable to work due to an accident or illness.
Remember that whenever you are working toward financial wellness, you should now think selfishly. Let us know in the comments how is your journey to financial wellness going…
[…] gotten your paycheck yet and do not want to tap into your savings (because this is a very bad habit). Wouldn’t it be nice if you could receive a small part of your paycheck earlier? Then you […]