When it comes to managing our finances, we often make concrete plans and try sticking to them throughout the year so that we are able to achieve our goals, don’t we? But how often have you witnessed times when we haven’t been able to execute our plans to the point, or when some unanticipated events or expenses come up and dig a deep hole in our pockets. A recent research study suggests that more than 85% of the individuals are not able to stick to their investment plans due to unforeseeable events. However, it is not the end of the road; you can still make some amends and put your finances into shape. Here are five such tips can help you take control of finances when you think not everything is going as per plan.
Check your debt and pay it down
List down all of your debt, what kind of interest rate is being charged on each of them, and how much of it left to be paid. The first rule of getting your finances into shape is – knowing how much of money is lined up for outflow. Look forward to reducing or paying off your debt before putting your spare money into any form of investment. The reason is simple; your savings or interest income or even dividend won’t match up to the rate of interests levied on credit cards or loans. You’ll end up losing more money than earning if you don’t cut down your debt. Try paying more than the minimum amount on your credit card; make an extra installment or two on your loan repayment; try and look for alternatives which charge a lower amount of interest.
Stick to Laddering Investment Plans
Set aside a small chunk of money each month and invest it into a systematic investment plan. You can look to invest in mutual funds, deposits, etc. The idea is to save a small amount of money every month and make it grow into a big pool of capital without making any significant dents. You may also consider setting up automated investments so that each month, a small amount of money is transferred or invested in a deposit or fund on your behalf. You can also look to invest in different vehicles working across various sectors. For instance, take up a relatively aggressive approach for the IT sector and a conservative approach for the automotive industry. Don’t look to put all of your money at once, hedge it properly and go in gradually with smaller investments that turn into a bigger pool with each passing month.
Review & Redefine Your Goals
It is essential to do an annual check and review your last year’s performance. Figure out how much you were able to save and invest, how much was the return, what was your goal for last year, were you able to reach where you intended to? This is a helpful exercise and often recommended by financial advisors. The idea is to ascertain where you did right, where you missed the buck, what factors affected your strategy, and how much were you able to achieve. Once you have successfully reviewed your previous year’s performance, it is time to redefine your goals. Prepare for the contingencies you couldn’t plan for previously, take into account all of the factors that hampered your plans, and make room for the anticipated events for the coming year. You’ll have a better understanding of your position and will be able to put your finances into shape in the coming year!
Save wherever you can
According to Eric H. Gordon – It’s not just about the more significant savings that matter, the little ones matter more than you might actually think. Resorting to a simpler lifestyle; cutting down on luxurious experiences; finding cheaper alternatives to recurring expenses; lowering down expenses incurred in the name of stress like drinking or smoking; upping your retirement contributions; killing the urges of reckless spending; comparing prices before making purchases; etc. are some of the ways you can make a gradual shift from an expansive lifestyle to a rather minimalistic one. All of the money that you save in the process can add up to a considerable amount of capital. Try out these small saving tips, and you’ll surprise yourself. As they say, money saved is money earned, and such this quote applies to us in its real sense. Getting your finances into shape requires realigning expenses, and most of the ordinary recurring expenses are often ignored.
Invest in Yourself
The best way to put your finances into shape is by investing in yourself, increasing your net worth, finding yourself in the best health and making the most of every day. Take out time to check your credit report; figure out your credit score; know your real hourly pay; look at your pay grade and figure out how much you are taking home after paying taxes, and find out how much your own net worth is. Take out time and find where you stand; what are your assets, what are your outstanding liabilities, how much are you able to save at the end of the month, are you saving enough to meet your goals? You need to invest in yourself; spend time on maintaining your health; keep your medical expenses in check; avoid indulging in excessive drinking, smoking, etc.
Invest in enhancing your skills, take up a certification, and upgrade your career by investing in your own talent pool. Increase your net worth, find a better paying job or set up an alternative source of income on the side. You may consider taking up projects on a freelance basis, utilize your skills to their true potential and create a parallel stream of income.
Bonus Tip: Get rid of Junk
You may have succumbed to the urges that made you buy stuff which you probably never really needed in the first place; it is time to get rid of the junk. Sell off unwanted accessories, free up your space and make room for that extra cash to help you manage your expenses.