Improve your money situation by gaining a stronger understanding of personal finance and take control of your money. Learn about effective budgeting, how to eliminating and control debt, use credit wisely, maximise savings, invest and more. Learn how to establish strong personal finance habits now to make a big impact on your financial future.
Practical Steps to Gain Financial Control
Step 1A: Set up a budget and stick to it.
Setting up a budget is crucial when it comes to managing finances. You need to have a accurate budget which will allow you to identify areas of savings which will assist in point 1B and the additional steps below.
Step 1B: Set up your emergency fund.
Many financial experts alike suggest having an emergency fund which is equivalent to 3 months worth of wages. It may seem like a lot to set aside, however it is crucial to have this buffer to protect against unexpected circumstances such as vehicle issues, appliance repairs, illness, relationship breakdown, etc.
Step 2: Eliminate personal debt.
Debt is a killer that needs to be dealt with quickly and by using proven techniques. Creating and sticking to a plan is vital in getting out of debt – you must be discipline! Once you have eliminated your personal debt, your discretionary income will increase dramatically and should be applied to the steps below.
Step 3: Set aside 3 to 6 months of living expense funds.
You can think of this as your “just in case” fund. It is slightly different than the emergency fund as its to buffer against job lost. Whilst it can be an extension of your emergency fund, it should be looked at separately.
Step 4: Invest 15% of household income.
Now that you have your emergency and living expense funds set up along with your debt paid off, you can use your income to begin investing in tax-friendly investments. Here you are simply taking the extra income created from the above steps and redirecting them to wealth creating strategies. Just like in previous steps grow your investments one at a time so you don’t spread yourself to thin.
Step 5: Pay off your home mortgage early.
Pay off your home early by using any “extra income” to your monthly house payment. Even an extra $200 can add up significantly to enable you to pay off your house early so that you can finally own your home—free and clear. See how extra repayments to your mortgage can save you in interest and reduce the length of the mortgage.