If you want to live a more financially secure life, you need to take the bull by the horns and get your finances under control. Instead of seeking outside help to manage your money, it is much more economical, not to mention liberating, to become your own financial advisor. Sounds complicated, right? It doesn’t have to be. Here are some simple things you can do to start taking better care of your finances now:
Improve Your Credit Score
If you’ve struggled to pay back debts, missed payments or defaulted on loans in the past, the first thing that you should do in your new roles as your own financial advisor is to gather info on credit repair services that can help you improve your credit score. This will ensure that you can access low-interest credit should you ever need to borrow money for those big purchases in the future.
Track Your Spending
Next, you should set up a simple spreadsheet to track your spending on a day to day basis. It is so easy to overspend on little things like coffee and night’s out, but if you track every penny you spend for a month or two, you will be able to identify where cutbacks can be made that will make you richer at the end of the month.
Organize Your Debts
If you still have outstanding debts, whether they be from credit cards, loans or other services, it is important that you get them under control using the debt ladder. In order to do this, write down all your debts, how much they’re worth and what the interest rate for each is. Then, organise them so that the debts with the highest interest rates are at the top and the lowest at the bottom. You should then start to focus on paying more off the debts at the top of the ladder first because these are the very debts that are costing you more money.
Start an Emergency Fund
No matter how good your budget is and how careful you are with money, there are always going to be those times when the car breaks down on your pets get sick, which will knock you off course. If, however, you have an emergency fund of between three to six months pay behind you, no matter what happens, you will always have a cushion to fall back on so that you don’t get into financial trouble again. Obviously, it might take you a while to build up this fund, but start now, and you’ll soon see the benefits.
When you’re your own financial advisor, you need to think about the absolute worst things that could happen to you, such as the loss of your job or a serious illness. How will you cope with these things if they last longer than your emergency fund will cover? Insurance is usually the answer. It might seem like an extra expense when you’re trying to get things back on track, but it will stop you from falling into a bottomless pit of debt and distress should catastrophe strike. So, take out life, health and income protection insurance and improve your peace of mind.