It’s time to take a look at your finances.
Are you saving and investing enough? Are you drowning in debt? Or maybe you’re financially secure but not quite comfortable yet.
Today is an awesome opportunity to figure out your goals and plan to get your financial house in order. Here are 5 ways to begin the process:
1. Your budget is your blueprint
Every time a new home is built, there are plans and blueprints. This is your budget. If you don’t have a budget in place, you’re more likely to overspend and wind up in debt.
A popular budgeting method is the 50/30/20 rule.
50% of your income goes to the essentials, 30% goes to wants, and 20% goes to debt repayment and savings. I suggest 30% to savings and 20% to wants.
To create an honest budget, review your receipts and/or account statements, monthly bills, loan documents, and credit report. Tally up all of your spending for the month and subtract that sum from your monthly income.
If you end up with a negative number, immediate changes need to occur. You can increase your income and/or decrease your expenses. Either way, be prepared to sacrifice something.
If you end up with a positive number, make sure you’ve included saving and investments, even it’s a small amount to start.
2. Your needs are your foundation
Here lies your 50%. Within your budget, make sure you’ve covered the essentials. Make sure you can afford a place to live, have food to eat, and have money tucked away in case of an emergency.
Housing is expensive in most cities, but there are affordable options. You have to keep it real with yourself and accept that you might have to downsize, get a roommate, or move back home. Consider all of your options.
Just an FYI, if your initial budget ended in a negative number, you can’t afford your current lifestyle.
3. Savings and investments are the support beams, roof, walls, and windows
Here is a portion of your 30%. Pay yourself. Prepare for the future. Saving and investing is time-based. Compound interest works best when it has time to build.
The earlier you start, the more you’ll have later.
4. Your debts are your repairs
Here’s where the rest of your 30% is going.
Your debt can be a leaky faucet or a flooded basement. Both situations need to be taken care of sooner rather than later before they cause even greater damage. They can pop up at anytime and have long-lasting consequences if not handled properly.
Fixing the problem efficiently will save you a lot of money down the line.
5. Your wants are aesthetics
Your remaining 20% or less. These items are not necessary, but are nice to have.
I know 1000-thread count sheets are comfy, but they are not required to get a good night’s sleep. That brand new luxury vehicle parked out front is very sexy but the paid for, used car will get the job done…and so will walking, taking pubic transportation, or riding a bike.
Do you have your house in order or is it time to renovate? Take a look at your finances, make a plan, and start building.
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