Five Steps To Improve Your Financial Wellbeing

Karl Fredrickson

Five Steps To Improve Your Financial Wellbeing

1) List your debts from the highest balance to the lowest.
2) Research online if you can get a better deal, whether this is to move all debts to a loan or find credit cards with 0% interest.
3) Designate a certain amount of money to pay off the debt with the highest interest rate first.
4) Pay the minimum balance for all the other debts until you have completed this debt.
5) Throw every other penny you have into paying off this debt.
6) If you can, add an automatic payment plan too.
7) Once you have completed this debt, start with the next highest interest rate and start to pay off this debt.
8) Repeat the process until you have paid off all debts.

Start to get rid of things that no longer serve value in your life. Start to streamline your accounts, get rid of any old accounts that are no longer working for you. A right way of reducing debt is to start seeing spending as how much effort you have had to work to require this item; what is your hourly rate to acquire this? Would you be better off spending this money buying an asset that will bring more money into your life in the long term? Though it still takes time to pay off your debts, and the road is not always easy, once you are on the way with your debt reduction plan, it will be a good idea to set yourself a weekly budget to live on.

Plan a budget
Budgeting is not hard – you just need to sit down and make a few lists.
On the first day of the month, sit down and look at what is up and coming for the month ahead. This gives you time to tweak the budget based on what is going on.

List all your monthly income amount and bill payments that you make every month, such as rent, telephone bills, and gas/electricity payments. List all the debt payments you have to make. See how much money you have left over.

Set yourself a realistic budget that you can live on for the month. You are not going to live in a cave and never purchase a new thing, but making small changes can make a huge difference. For example, I budget for the money I have for the week and take money out of the cash point every Monday. Then on Fridays, I make money out of the cashpoint that I spend the weekend. Other than that, I tend not to use my cashpoint card for purchases, unless if it is a real emergency. Therefore, I feel that I always have money on me – I do not have the feeling of deprivation that people find when they are on budgets and thereby live within my means.


Debt reduction
Look at ways of getting rid of the unnecessary. Get rid of subscriptions that you never use, look around for better deals for your energy supplier, work from home, look at things you can do without spending lots of money. Maybe limit yourself to one drink at a time – no hangovers or getting late taxis home. Do not buy it unless you need it – refrain from buying on impulse. Maybe wait 30 days if you are going to buy a big purchase.
You will have slip-ups along the way, but once you know where you went wrong from your past mistakes, you have a clearer picture of how much money is going in and out, and how much you have been spending, but you also need to be true to yourself.
Every month, review the month ahead and reflect on last month’s budget. Did you stick to your budget? If not, why not? What could you do the following month to ensure your budget stays on track? Take on any lessons that you have learned from the previous month to improve your budget.
Each month, review your expenditure spending. Identify from your current spending what you could cut back on. Are you spending money unnecessarily? What can you eliminate from spending even further? Start to reflect on every item that you bought last month. Did this add value to your life? Each month, do a review of your spending targets and the goals that you have set and see if you can make any room for improvements from the previous month.

Build an emergency fund
At the same time as paying off any debts, find a way in which you can set up a savings account, called the Emergency Fund. This fund is for absolute emergencies that may arise in your lifetime. It is not for fancy shoes, a lovely holiday or new gadgets for the kitchen as these are not emergencies. Build this up to at least 24 months of your expenses. Work out your monthly payments: _____ x 24 months and this is the total you should be saving up: ________. This starts to give you peace of mind for things like job redundancy, a cut in working hours, a long-term illness, or unforeseen changes that may occur in your future.
No matter how prepared that you think you are, having an emergency fund to fall back on is a good thing. You can roll with whatever life throws at you, as you never know what is going to happen around the corner. Since I have saved my 24 months’ worth of living expenses, it has had an immediate stress-reducing effect. I feel I have a sense of control over my life that I never felt before and therefore, feel confident about money. You can set up your rainy day fund either as an ISA account or savings account, or search online for the best rates of return that work for you. Again, set up an automatic payment into this account. Therefore you will not be tempted to spend the money first and can just watch it grow.

Build your knowledge
The best advice about becoming financially literate is that you can build up understanding from a wide range of resources. The more you read and learn about different approaches, systems, and processes people put in place, the more you start to feel more confident with money and therefore, in turn, act and build upon this knowledge. Build up your experience by reading books, blog posts, and attending seminars on personal wealth. Take time to learn and understand the basics around saving, investing, pension funds, asset building and how to reduce debts. Knowledge is power – making an effort to educate yourself is the most critical step in understanding and managing your finances. Books like The Automatic Millionaire by David Bach, Your Money or Your Life by Alvin Hall, and The Wealth Chef by Ann Wilson are good reads. While other useful resources are blog sites like Mr. Money Moustache, Money Boss, and Zen Habits, which can give you different perspectives and ideas on saving more, how to be debt free, or just how to live better with less money. You can act for yourself some of the ideas presented.

Spend time building upon your personal development. Take up more voluntary training at work to learn new skills, learn a language, and start to look at your own skills that you have and build upon this right now. Make sure you read a book on finance at least once a month. Therefore, rather than saying ‘I am no good with money,’ start to be the quiet person who does not need to talk about money obsessively but feels that you are well read and have become financially literate. When you learn something new, ensure you write it down, try it out, experience it of course, and you can build upon your own set of rules. In time, you can create your financial philosophy.