You pay the bills, have a little left over, and you’re making what you consider to be a reasonable living. So far, so good; but how long is it since you analyzed your finances in any detail? Do you know how much you’re paying for regular bills like utilities, or broadband? Have you got a healthy savings account, a solid pension plan, and a contingency fund should anything go wrong? What are you doing to increase your wealth through investment?
Just because the books are balancing at the end of the month doesn’t mean you couldn’t be doing better financially – and in some cases a whole lot better. This could be a good time to getback to basics with your finances and see where you could be managing your money more effectively.
If you’re strapped for cash, a budget is essential so you can keep a careful eye on exactly how much is coming in and going out. As your earnings increase and the likelihood of being unable to pay a bill diminishes, you may have been neglecting your budget because you feel the pressure is off now you’re bringing in more money. However, budgeting tells you a lot more about your finances than whether you can afford to write a check or not.
Preparing a budget means you have to examine your outgoings in detail, soyou have accurate monthly figures to put into your budget spreadsheet. Examining your regular outgoings gives you the opportunity to check how much you’re spending on essential services and purchases, and you might be in for a surprise if you haven’t reviewedthese figures recently. For example, your energy bill may have gone up by more than yourealized, or your mortgage interest payments could be looking a bit high compared to advertised rates.
If you don’t study what’s leaving your account each month, you won’t spot the expenses that could be reduced to save you a sizeable amount of money over the year. You may not need to economize on your preferred luxuries, so this isn’t a case of sacrificing your golf club membership or buying cheaper wine. It’s about identifying achievablesavings and not wasting money where you don’t need to; why pay more for your broadband or car insurance when you can get the same kind of deal cheaper elsewhere?
Investments may already form an integral part of your savings, pensions, or personal wealth growth strategies, but have you kept much of an eyeon how any existing investments are doing? Could you be making more money by reinvesting elsewhere? If you have a financial adviser and stockbroker with whom you have a good relationship, that can be a valuable asset; but it could also lull you into a false sense of security. Take some time to check on the performance of any investments and make sure you’re achieving the returns you need. If not, have a chat with your advisors and see how you could make some beneficial changes.
If you don’t have or don’t want your own stockbroker, it’s becoming easier than ever to manage your own portfolio of investments using a variety of online brokerage services. Of course, having access to the services doesn’t give you the skills of a professional trader, but there are ways to learn the business and start buying your ownstocks and shares profitably. For instance, you could enroll in a course on options trading to learn the ins and outs of the market before making any investments of your own.
Don’t underestimate the value of a financial advisor. They can do far more than just manage your investments and help you get the most out of your pension. A good advisor takes time to understand exactlywhat you want to achieve in your life and what’s important to you and helps you find the most effective and rewarding strategies to manage your money and achieve your goals.
What about traditional, safe savings accounts? Investing wisely will make you money, but you should never invest more than you can afford to lose, just in case the worst happens. It’s always a good idea to have a modest nest egg squirreled away for a rainy day, even if it’s not earning a vast amount of interest for you. It’s not impossible to get a reasonable interest rate on a long-term savings account, so make sure you’ve got the money in an account that pays a decent percentage of interest and checkup on the account every so often to make sure it’s still offering a competitive rate.
Investing in you
Money management is all about getting the best out of your finances; not wasting money, making what you’ve got work harder for you, and increasing your personal wealth. However, the point of all your efforts in that regard is to be able to enjoy your life and make the most of your time, not to turn into a miser. Sometimes the most effective way of making money is to spend some on yourself; for example, a course to develop your professional skills.
It’s also wise to invest in your own health and well being because your health is not only critical to your ability to continue to make money, but it plays a crucial role in your ability to enjoy your life. If you pay for a gym membership and rarely use it, you’d be better off engaging a personal trainer to help you reach your fitness goals. It will be more expensive, but you’ll gain far more from the higher investment.
It’s surprising what a difference it makes taking these few simple steps to manage your finances more efficiently. Saving and avoiding wasted spending on the one hand, and earning more from the money you have on the other can combine to make a significant difference to your disposable income each month.