Starting with a solid foundation is key to building your financial house
Typically, the beginning of the year is a time when we sit down and plan our expenses for the year. You have probably made some New Year’s resolutions related to your health or other areas of your life. Why not make a resolution to also get your financial house in order?
4 resolutions to help you get your financial house in order:
- Stop procrastinating on financial decisions
One of the main obstacles to planning effectively for your long-term financial goals is procrastination. We sometimes have a tendency to put off making important financial decisions due to lack of confidence. Typically, the lack of confidence is due to the fear of making a mistake. In this situation, you can easily overcome this obstacle by educating yourself. Enroll in financial classes or workshops. If you need more guidance, consider hiring a financial planning professional.
- Know your finances
Before you can put a plan in place, you need to organize and understand your expenses, savings, debt, etc. You should know exactly how much is coming in…how much is going out… and how much is left over. Not only is it important to take the time to create these cash management statements so you have a starting point, it is also important to include your spouse or significant other in this process. For various reasons, sometimes we have a tendency of not wanting to talk with our significant other about financial matters. It is important that you both have an understanding of the family finances and be able to set goals as a couple. Either of you should be able to step in and be knowledgeable about everything from the monthly budget to insurance and investments.
- Create a monthly spending plan
Do you know where your money goes? Do you have a positive cash flow? If your answer is ‘no’ to either of these questions (or I don’t know!), you need to create a spending plan (budget). We all know how important it is to live within our means, but it is equally important to identify where your money is being spent. Creating a spending plan also helps you identify areas where you can potentially reallocate to fund your goals.
- Create a wealth building strategy
Once you have built your foundation you should focus on building wealth. But what’s involved? Are you building wealth or just saving money? It’s important to understand the difference. Saving is important for building your emergency fund or for short term goals. But what’s involved in building wealth? Building wealth is about making your money work for you. You need to understand the basics of investing, how to make investment decisions and the process of creating an investment plan. In addition, it is also important to build a longevity plan into protecting your wealth.
Take some time to plan you finances. Following the above tips will help you make progress towards building a solid foundation to your financial house.