5 Tips to Get Your Finances On Track
I’m often asked to provide the specific steps that apply to everyone when it comes to personal finance. Boy, do I wish it were that simple! There’s so much nuance in personal finance - it is, as the name suggests, personal. But there are a few basics that apply to most clients in some way. I’ve made a list for you below with some tips for tackling each step.
1. Get financially literate
Educate yourself on some basic terms and principles. You’re reading this blog, so you’re already off to a great start! Read some finance books - I’ve got some great recs if you don’t know where to start. Scroll short-form videos about money management on Tik Tok or YouTube. Listen to some money or business podcasts. Talk with family or friends who understand the basics. Call up your investment account company and ask to consult with someone. Or reach out to me with specific questions on areas you’d like to better understand.
2. Create a budget that you can stick to
One of the easiest ways to abandon a budget is to make it unrealistic. Remember that time I did just that? So create a budget that’s based on your actual spending! If you find it’s unmanageable then start to pare it down. It might take some time to get it just right. And just like parenting, by the time you figure it out, something will change and you’ll need to pivot. Be flexible and you won’t get bent out of shape.
3. Eliminate bad debts
Know the difference between good debt and bad debt. A simple way to distinguish the two is applying the question - “Am I financing my future or my past?” Credit card debt from trips, stuff, or outings is bad debt. You’re paying for things that have already taken place. Meanwhile a mortgage and — in most cases — student loans are considered good debt because you’re financing your future and will likely see a return on that debt.
Once you’ve identified that bad debt, work to eliminate it as quickly as possible. Stop paying for the past and start focusing on your future.
4. Save & Invest
Save for the short term — trips and high ticket items — and invest for the long term.
Planning a vacation for next summer? Start socking away a hundred bucks a month in a high yield savings account now.
Planning to retire in 35 years? Put a couple hundred bucks a month in your work-sponsored 401k or independent Roth IRA now.
In both instances, you’ll be glad you did later.
5. Adjust your money mindset
Money is a tool. But as simple as that sounds, our mindsets about money are rarely simple. Money can be emotional, psychological, and triggering. The sooner you work on neutralizing money in your mind, the better you can utilize it.
If you’re operating with a scarcity mindset, practice spending without guilt on things you love. If you’re a spender, try trimming back on the things you don’t love and focusing only on what you do.
Consider working with a coach to help build better habits around money.
These five areas can make a big difference - especially if you’re overwhelmed by all of the things. So why not make a summer time goal to start with step one? Contact me if you need motivation and encouragement along the way. You can do it!