Building your Financial Stature
The more you know, the better prepared you are. With every decision you make, with every financial move you make, who is watching you? In most cases, no one is watching your every transaction like a hawk, but creditors make it a point to keep an eye on those who are wavering on their payments.
To ensure you avoid the menacing eyes of your creditors, here are three tips.
A Strong but Fair Budget.
Yes, I agree, making a budget has been the pinnacle of all financial planning strategies for everyone. There is no way of growing your financial stature without a strong foundation, which can only be built on sticking to a budget. There are many online tools that can help you create a budget based on your living. Check out https://sorted.org.nz/tools/budgeting-tool/welcome for a quick and easy tool to make your budgeting exercise fun. Before you start the exercise make sure to print out your last 3 months’ bank statements or download them as a pdf. The last 3 months will give you an indication of how much you are spending on fuel, food, loan repayments, etc. Use this information to make a budget that satisfies your needs and allows you to put aside some money for your home deposit or your future investment. Here is one suggestion you could follow: create a budget in which you save 10% of your income for the next 3 months; after 3 months make a new budget and increase your savings portion from 10% to 15%. Gradually increase your savings to a level that gives you the freedom to spend wisely and save for your future.
Become the Watchdog.
With a budget in hand and a plan to stick to the next logically step is to watch your every move. There is no easy way around this one. Like your daily morning routine, you need to wake up and look at your bank balance. It may seem tedious but it gives you the actual amount of funds you have at that time on the day. By following this routine, you know how much you can spend on the day and you know how much you should have at the end of the day. By staying informed you can keep yourself accountable for your actions and reduce those unnecessary expenses.
The Good and the bad Debts.
Understanding the difference between a good debt and a bad debt is important when considering what debt to pay off sooner and what new debt to take. A good debt is any debt in which the investment (or purpose of the debt) will grow in value or incur future income. A good example is a home loan as a property can in increase in value. In future, you could sell the property, pay off the debt and have some funds for your next home. A bad debt can be a personal loan taken out for a holiday. Whilst a holiday is good for both the mind and body and refresh you for your return to work, there is no value added after the holiday nor any income generated. Debts like this need to be paid off as soon as possible as holding the debt will not help move you forward.
These tips are a great place to start improving your financial stature. The best action to take is to start right now. Make sure you have a goal; whether it’s a home, an investment or your retirement, a goal will shape your budget. Remember, stick to your budget, be the watchdog of your own transactions and think carefully about the good and bad debts you have.