If you’ve found yourself recently re-evaluating your financial situation and priorities, you are not alone. Although we are overall better off than our parents or grandparents, there is also a lot of uncertainty around. It’s no longer the norm to have a job for life and the cost of living is constantly going up, whilst the political situation (which has a huge impact on economy) is everchanging. It’s no surprise, that we are looking at how we can make our own future a bit more secure and financially stable.
The first step to financial freedom is to take an honest and thorough evaluation of where you are at the moment so that you can become more financially stable in the future.
Like a magical keys to your future castle, Here are 5 keys to financial security and success to help you get started
1. Put your budget in writing
First of all, you need to have your budget in writing. It’s pretty difficult to set a budget you can stick to if you don’t know how much money you have coming in, or where it’s being allocated to. Start by writing all your monthly income and then your monthly outgoings. Some expenses, like your house bills and utilities, are fixed, some, like your food shopping might need to be estimated.
Once you’ve written everything down, keep it somewhere handy, because the first month, you’ll need to add to your budget your actual spending and compare the figures. This is because you are likely to underestimate your movable outgoings than to remember the actual money spent.
Make sure that you track down every pound or dollar and keep monitoring your spending for the whole month. After that adjust your budget according to your actual spending. For example if you originally thought that you spend £50 on food shopping a week, but then actually spend £75 adjust your budget to the higher figure. There is no point pretending that you are spending less than you actually are.
If you are not sure, how realistic it is to stick to your budget, here are my top tips on making sure you do!
2. Spend less than you earn
Sometimes this means you need a second job, better job, or to make some hard budget cuts. You need to make sure that at a minimum, your income exceeds your obligations. Preferably, you will get into a situation where you are saving a significant portion of your income.
My tips on spending less
- How to save when dining out >>
- How to save on food shopping >>
- How to save money, when several generations live together >>
3. Payoff your debt
The obvious first choice here is to eliminate credit card debt. Follow that up with secured debt, up to, and including your mortgage. For inspiration, play around with a mortgage calculator and see how much money you’d save in interest by simply paying one additional payment each year. Seeing that amount should inspire anyone to stick to their plan!
If you’ve read my other articles, you know by now that having an emergency savings account is crucial for many reasons. It’s also a good idea to keep 5-10% of your salary in a saving account for longer term goals or larger emergencies. After those goals are met, consider investments!
5. Keep good records, and make sure you are taking advantage of all of your benefit options
These simple tips go kind of hand in hand. If you are a good record keeper, you’ll be aware of what benefits are available to you through your employer, insurance company, and other organizations you belong to.
You also want to make sure you have a will and your final arrangements are planned for, to protect loved ones. You want to make sure you have adequate coverage for all of your needs, but not double coverage that would only pay once. Keeping records of accounts paid in full will protect you if a company later claims you owe them money, not to mention for tax reasons!