As an adult, you have to juggle credit card bills, rents, mortgage loans, retirement accounts… And just about a million other jargony terms that stress you out. So, if you’ve been spending your money with (arguably) reckless abandon – and hoping that you’ll have enough left in your bank account at every month’s end, well, that’s pretty understandable. But not ideal. So, here are 5 tiny steps to take that’ll help you finally get a handle on your finances.
#1 – Figure out your ideal financial future
How can you get anywhere without knowing where you’re going? It’d be like trying to scale Everest without any idea where the summit is. So, sit down with a pen and paper – and make a list of all the things you want to achieve financially. Do you want to buy a bigger house? Retire at 45? Pay off your student loans? It doesn’t matter if they’re short- or long-term goals. Write them all down.
#2 – Calculate how much money you need for those goals
So, let's say you wanted to build up a rainy day fund. How much money would you require for that? Well, experts recommend storing anywhere between 3 to 6 months' worth of expenses in an in-case-of-emergency account (e.g. you get retrenched, someone in your family falls sick, etc.). Meaning? If you currently need $3,000 a month to survive, you should aim to keep between $9,000 to $12,000 in your rainy day fund. Go through each of your goals and arrive at a rough figure.
#3 – Set a reasonable (!) timeline and track your cashflow
This is where you’ll have to take stock of your current financial obligations. So, let’s say your current financial standing is as such:
- Necessity spending (i.e. bills, rent, food & drinks): $3,000
- Student loan repayment: $1,000
Theoretically, that leaves you with an excess of $2,000 a month, meaning you could achieve your 'rainy day fund' goal in 4 to 6 months. But that doesn't mean you should. Give yourself some leeway (so you enjoy the process!) to boost goal adherence. Aim for anywhere between 6 to 10 months instead.
#4 – Reconcile your goals with your actual spending
Track your cash flow for a few months. Understanding your expenses will help you figure out exactly where you’re going right (and wrong!) when it comes to meeting your financial goals. Plus, knowing where you’re spending money also helps you see where you can cut out unnecessary expenses (e.g. that daily morning cup of $7 coffee at Starbucks).
#5 – Educate yourself on ways you can grow your wealth
Saving up for short-term financial goals (e.g. rainy day fund) is pretty straightforward. Owing to their smaller sums, you can achieve them in a matter of months. But this changes once you approach the long-term financial goals. Trying to save up for your retirement – and looking at sums ranging in the millions can have you worrying day-and-night. This is where you should look into ways to grow your wealth more quickly (e.g. investing in stock markets, parking your money in a high-interest savings account, finding ways to make more money).
Need help setting financial goals?
Lucky for you: help is readily available. The Daily Routine Journal provides you with all the space you need for financial goal-setting – and even guides you through the process of breaking your goals down into manageable, bite-sized chunks. Check out how others have transformed their lives with the journal here!