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?
3 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.
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?
2. 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. Taking the time to create Cash Flow and Net Worth Statements can give you a starting point to understanding where you are financially and help you to measure your progress toward your goals.
The Cash Flow Statement will help you weigh your income vs. your expenses. The Net Worth Statement is a balance sheet which summarizes your assets and liabilities and reveals your net worth.
It is important to include your 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.
3. 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.
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.
If you would like to learn more about your relationship with money, take the “Money Type Quiz.” Only you see the results.
