How to get your Finances on Track

Five steps to improve your financial health

A few months ago, I had the bright idea to totally overhaul how I manage my money.  Prior to this, I had not been following any system or structure, and it showed in how I handled my finances.

I would usually wonder at where my money was going because I didn’t have a system to track and review my income and expenses.

Since I implemented these much-needed changes, I have seen a considerable difference in not only my spending habits, but also a boost in my savings and investments.

Today, I would like to share a few of the tips I have learnt along the way, which I believe will help you manage your money better.

Why we should manage our money better.

Here’s the thing: Your financial health affects every area of your life.

There is a popular scripture that I have always found intriguing, it says:

“Money answereth all things.” (Ecclesiastes 10:19)

Imagine that!

Having money and knowing how to use it is one of life’s greatest blessings, this is particularly so if you are looking to transition into a new career or start a business.

Having a buffer or a nest egg can make your career change less stressful and help you focus on creating the life you have always dreamed about.

But being in a good financial place is not just something we wish for; it requires a high level of intentionality and focus.

The great part is that this is an area where you can quickly see the results from better money habits.

Having some money set aside as a cushion, buffer or even seed for a new project is almost always a good idea. It can be the difference between a frustrating or aborted career transition and a successful one.

FIVE STEPS TO IMPROVE YOUR FINANCIAL HEALTH.

The following ideas will help you get clear about what you should be focusing on when it comes to your finances.

1. Get clear on your financial goals and values.

Do you have any financial goals for this year and season of your life?

I have found that at the start of each new year most of us, including the billionaires we read about, want to earn more money, and possibly spend less.

However, each of us need to get clear on what “more money” looks like. Is it $50,000 more, $100,000 more or even a million more.

Getting clear on our financial goals will make achieving them possible. However, you cannot create your financial goals in a vacuum.

Financial goal setting without a value alignment will usually lead to a frustrated or misaligned outcomes.

You want to make sure the things you want, are the things you need and the things that deepen your identity and purpose.

Financial Goal Setting Exercise:

• Take a piece of paper (actual writing works better though you can use your phone or laptop)
• Answer these questions:
• What amount of money would I like to have in savings, investments at the end of the year?
• Why is this figure important?
• What will this money do for me? Do I have any major purchases e.g. buying a house, car, going back to school etc.
• Will I have an emergency fund and how much will I need in it?
• What financial habits do I want to inculcate into my life?
• What will success look like for me?

While doing the above exercise, remember that financial goals go beyond your earnings, you should also consider ways to spend less, investments into your personal development, and of course, opportunities to give back.

2. Review your financial decisions in the last year.

Now that you have a better sense of your financial goals, you can use this information to review your past behaviour, even before you set out your future intentions.

This helps you identify how your actions got you to where you are.

This exercise is not one for recriminations or passing the buck, but rather an objective review of where you have been and where you are going.

This will help you pinpoint the mistakes you made (and should avoid), and the things that worked well.

When I think back to my own journey, I realise that one of the things I did wrong was not having a system to allocate my income before it comes.

These days, I write out how the income will be distributed before I start spending. This has truly been a game changer for me. This way, my money always goes to the things that matter, first. Some buckets I consider are my giving (some call it tithing), my savings and investment bucket, travel bucket, groceries, utilities, personal expenses amongst others (I stay with family so I don’t pay rent).

3. Create a plan.

Your plan is the framework to put your financial house in order. It is the set up to ensure you get your money back on track.

This plan will be different for most of us, however there are some core ingredients that must be in your plan.

• It must clearly state how you intend to achieve your earlier prescribed financial goals.
• It should list the resources you need to achieve your goals.
• Using the inverse goal planning method, you must filter each goal against the different areas of your life. For example, your work life, health, and relationships may be affected if you are looking to earn an additional $100,000 this year. It may require that you work longer hours, take on side hustles amongst other things, leaving less time for the people in your life. This means you should take such changes into consideration.

4. Budget

A big part of your plan, especially if you’re looking to get your finances on track is to identify and plug your money gaps.

A budget is a great way to do this.

If you’re anything like me then you’ve had a dicey relationship with budgeting. However, a budget doesn’t have to be some complicated spreadsheet with 100 tabs, it is basically a record of your income and expenses.

While I have a spreadsheet I use (sometimes), I have found that I usually just write out my expenses in my notes app.

The most important piece of information here is that you must have a record of your finances. It is up to you to decide what medium makes the most sense.

5. Continually review your plan and evaluate your progress.

You want to create a periodic review of your progress and to adjust your goals where needed.
Here is how this article puts it:

“All throughout life, things are going to change, you’re going to have different desires. You’re going to have different priorities. You’ll want something that you didn’t want in the past, or vice versa – you’ll not want something that you did want before. It could be losing a job. It could be growing your family. There are a number of things that could change over time.”

Jordan Patrick, CFP at Commas

Having a system that allows you monitor your progress is always a good idea.

SET YOUR FINANCIAL COURSE TODAY.

Finally, improving your financial health comes down to the big and small decisions you make concerning your money and your life.

Creating and pursuing your financial goals is a great way to build the life you want, while periodic review ensures you remain on track.