Baby Steps To Take Control Of Your Finances.

The Basics You Must Get Right.

If you don't control your money, your will money control you. The lack of it, forces you to compromise.

If you're like me, I'm sure you don't want that.

Lately, I've been researching a lot of finances, because I've always wanted two things in life that I never had in the past.

These are:

• Security.
• Peace of mind.

Money allows us to have both of these, provided we approach it with the right mindset.

Now before I move ahead.

I'd just like to state that I'm no financial advisor of any kind, I'm just someone interested about finances and love researching it. Since I'm researching so heavily, I simply thought of sharing my findings and simplify it for anyone who finds it complicated.

Now let's just cover some super simple and basic things we need in place to manage our finances.

Firstly, Why Is Financial Literacy Even Important?

Because, it separates the wealthy from the poor.

The only difference between someone who has money and someone who doesn't, only comes down to one thing.

The information gap

You'll only act towards something if you have some level of understand and compression.

When you take the time to study your finances, you’re better informed, and therefore you can make better decisions.

Briana McGurran, Experian.com basically goes to say that

Financial literacy is the confident understanding of concepts including saving, investing and debt that leads to an overall sense of financial well-being and self-trust.

Says McGurran

Now let's start with the first step towards taking control of our finances.

First and Foremost, Where Do You Lie? Be Honest With Yourself.

The very first thing we need to do, is to open up all our statements and check our balances.

It simply comes down to getting clear on:

• What is outgoing.
• What is incoming.

Ideally, your income should be higher and your expenses(outgoings).

However, I understand that this might be easier said than done. Because we need to be very honest with ourselves on exactly where we lie on our financial journey.

Take a deep breath and realize that if you don't like what you see,

you have the power to change all that.

Secondly, Creating a Spending Plan. (A Friendlier Word for Budgeting).

I understand that the word budgeting can scare a lot of people to the bone.

It's a task that we often don't like doing, I suppose It's because we have to face the truth of what we can't do and the sacrifices we need to make.

However, let me shift your mindset here.

Did you know that budgeting can actually set you free, becuase you know your boundaries. You’ll learn to find freedom and creativity within that.

Dawn Bowers-Ferrara has written a brilliant article on budgeting, which I find really insightful.

When it comes to budgeting, it all simply comes down to this.

Spend less than you earn, save and invest a portion of that differance.

Want To Invest? Not So Fast, Focus on Building an Emergency Fund.

And chances are, you'll need more than you think.

Atleast 3–6 months worth of expenses should be your goal.

Not just expenses, but 3–6 months worth of income.

Your emergency savings are there when you need to fund something that spontaneously popped up out of nowhere, and you need to get it fixed right away. A car crash, or a sudden trip to the clinic, are both good examples of when an emergency fund can come in handy.

Unless you've got this in place, it doesn't make sense to invest. You absolutely require a safety net that you can fall back on.

The number you need to save for your emergency fund, will differ based on your expenses and income bracket.

Opher Ganel has an amazing post on finding the perfect fit for your emergency fund.

In this article, he goes to say that

“A true financial emergency is if, heaven forbid, you become temporarily disabled due to an accident or severe illness, or lose your job. If that happens, $1000 is not even remotely in the ballpark of enough to tide you over”.

Says Ganel

This is so crucial, chances are, you might need more than you think.

Cut Unnecessary Expenses, I’m Sure You Don’t Need Them.

Just take a minute to look at your statement and see where there are unnecessary expenses.

You might see a service or subscription that you simply don't use, or at least you could do without it for some time.

If you need to discern on whether you actually require a service or not, you could take part in a spending freeze.

It basically means, freezing a service you use for a period of time. At the end, you would judge whether or not you actually require it in your life.

I thought I required a full-fledged Adobe subscription, however the free version of Canva did the job just fine. I saved at least $20 that way.

Last but Not Least, Education Can Make All the Differance.

Not everybody likes learning, especially when it comes to finances.

When we start learning and reading, we realize just how much we don't know.

How can we actually start learning and educating ourselves on taking control of our finances? Where should we go to learn about this?

I'm actually going to make a separate post about this, however let me just explain it to you in a nutshell.

• Establish your motivations and goals behind learning about personal finance.
• Figure out your preferred learning method, do you like reading or watching videos.
• Carve out a portion of your day to dedicate to learning.
• Commit to actually implementing some of the things you've learnt.

Closing Notes.

Taking control of your finances might seem daunting, especially if you've never done it before.

That said, if you've been putting it of, it's crucial that you start somewhere.

I hope this article can be that starting point for you.

You'll also realize that you have so much more potential to grow, multiply and reach your financial goals. If anything, taking control of your finances should excite you, it certainly excites me, I can tell you that.

In This Article, We’ve Covered the Following.

• Taking the first step of understanding exactly where you lie in your finances.
• Creating a spending plan (budgeting).
• Emergency fund before anything else.
• Financial education can make all the differance.

I wish you all the very best to you and your journey to financial independence and happiness.

Thank you for reading.