Are you the master of your wealth? You should be!
In order to build a stable structure, you must begin with a heavy-duty financial foundation that will take care of you now while reinforcing your future goals. What do you need to do to put that structure in place? It is amazingly clear-cut. The tactics below will help to boost your monetary self-confidence and set yourself up for financial success.
Before you can proceed, you must be clear on where you stand financially right now. You can begin by developing a personal balance sheet. Make a list of each of your assets (what you own) and liabilities (what you owe). When you have gathered all your statistics this will give you a sense of your net worth.
Next, figure out your monthly cash flow and take a check of your credit. You can use a budgeting template like this one to help simplify the process.
Grow Your Net Worth
- Analyze your take-home pay
Make sure to spend less than you earn. Keep track of your personal finances with a tool like Moneydesktop, which can empower you to take control of your finance and simplify your life.
- Manage your debt responsibly by making your payments on time and pay extra on all your consumer debt.
- Save money for your long-term goals. Open an employer-sponsored 401(k) and make sure you take advantage of any employer matching programs.
Now that you are organized and following a growth plan you need to make sure you are financially safe. Try implementing these options.
- Build an emergency fund because life happens. It’s a must-have to keep you financially viable – as opposed to plunging into debt when you face an unexpected cost or other financial crisis.
- Check your insurance coverage. These types of policies will help to limit your out-of-pocket expenses when unexpected costs arise.
- Make sure you establish or update your estate plan. This may include updating your will, creating a living trust and instituting a power of attorney, and a healthcare directive.
Prioritize Your Debt Reduction
Be conscious of over-extending by paying excessive interest on the money you have borrowed. This can keep you from putting money toward your other financial goals. Debt repayment is a perfect way to start building your financial foundation. If you are interested in implementing a fast-tracked debt repayment strategy try the debt snowball method or another financial strategy to reduce your interest rates.
Define your financial goals
Now that you have put all the pieces together for your financial foundation it’s time to ask yourself what you want for both short and long term. Remember, your goals should be SMART: Specific, Measurable, Achievable, Realistic, and Time-bound. Below are a few concepts to help you get started.
- Provide a down payment on the home
- Build a retirement fund
- Save for children’s college
- Set up an emergency fund
- Save for bucket list vacations
- Become financially free
Now Let’s Make it Happen
- Be disciplined: Stick to the plan
- Maintain a balanced budget. You can’t be financially healthy if you are spending more than you earn.
- Automate your finances (regular money transfers from checking to savings, and online bill pay)
As you can see, constructing a financial foundation takes immense focus and determination. If you follow your step-by-step process you can’t help but see results. Most importantly you will begin to gain confidence in your capacity to create and stick to your new healthy financial life.