Whether you’re just starting out on your own or you’ve been making your own way for years, having a solid financial foundation is essential to your future. Healthy personal finances offer you security, comfort, and the opportunity to reach your goals, but achieving financial success can be tricky. In this article, we’ll give you a step-by-step guide to help you build your personal economy so that you can reach your financial goals.
What is Personal Economy?
When you decide to start building your financial future, it can be tempting to go big right from the gate. The global stock market, economic trends, and investment projections can be fascinating and alluring subjects that seem to promise a big payoff, but, for most of us, it’s best to start small. Instead of tackling the global economy, take a look at your personal economy.
Personal economy is more than just your bank account and credit card balances. Although your economy does include your personal finances – things like income, assets, savings, and debt – it paints a bigger picture of how you spend your money and why. Examining your spending and saving habits can reveal much about your personality, priorities, and areas for improvement as well as your financial needs.
Improving your financial wellbeing takes time, but the payoff is well-worth the commitment. Below are five steps to help you boost your personal economy:
Step 1: Know Where You Stand
As with any great challenge, knowing is half the battle. Whether you’re a freshly-independent student or a seasoned account-holder, accessing and understanding all your financial data is absolutely essential to building your personal economy.
Set up a space in your home or office where you can easily visually track all your information. Consider getting an extra-large dry-erase board to track progress or, even better, dedicating an entire wall to your aspirations with white board paint. Then follow these guidelines to get a complete picture of your personal finances:
- Take an inventory of your accounts. This includes checking and savings accounts, credit cards, stocks, bonds, retirement plans, and investments. Write down the type of account, who manages it, and what it’s for.
- Check your standing. Start off by checking your credit score. Think about what factors may be affecting your score and who might be looking into it. Make sure you are in good standing with your bank and any creditors or loan agencies.
- Look for hidden money. Many people are shocked (or pleased) to discover hidden accounts. Most often, employees who contribute automatically to retirement plans completely forget about their plan when they leave their job – check with previous employers or a national registry to see if you have lost or unclaimed benefit accounts.
Once you have your information prepared, it’s time to start planning.
Step 2: Get Organized
The second step to improving your personal economy is probably the most important. Planning, goal-setting, and organization are essential to not only improve your finances in the short-term but to set you up for long-term success.
First, figure out where you want to end up and set a SMART goal. SMART goals are:
Once you’ve identified what you want to achieve, set deadlines and milestones. Put your dates on a calendar and put reminders for yourself in prominent places around your home and office to keep you focused on the end goal.
Step 3: Stay Focused, Stay Busy
At this point, its time to really start working. The most important tool for improving your finances is budgeting. Schedule time every week to look at your accounts, upcoming payments, and expected income and to create a budget that meets your needs. Prioritize your personal finance time like you would work, school, or any other obligation.
While scheduling time to plan is an important part of building economy, it’s not the only piece that matters. Practice self-discipline in all aspects of your life – avoid going out for expensive meals when you can prepare them at home, cancel unnecessary entertainment subscriptions, and set aside expensive tastes for long-term savings.
Step 4: Get Smart
Budgeting is one of the most important ways for anyone to build their financial wellbeing. Once you’re ready to take the next step, however, consider taking a deeper dive into the world of personal economy.
Books, articles, seminars, and online courses are all great ways to increase your knowledge about finance, economics, time-management, and goal-setting. Schedule time each week to read books about budgeting or forming healthy habits and consider auditing a course at a local college on financial literacy or trading to bolster your knowledge and improve your skills.
Getting smart also includes bolstering your employment skills. A higher income is obviously a great way to improve your finances and there are plenty of ways to help you stand out among other employees. Focus some of your energy on learning and improving interpersonal communication, management, and resume-writing skills to give you a competitive edge.
Step 5: Pay, Save, and Invest
The final step to improving your personal economy is to pay, save, and invest. It can be tempting to try and jump into the stock market, guess global trends, or get involved with a promising start-up right away, but it’s important to make sure you plan for long-term stability, first.
Always start off by managing debt. Student loans, credit card debt, auto payments, and mortgages are just a few of the many things that can put us in the red – and they can sink our financial futures quickly if not properly managed. Focus on paying off debt at a reasonable pace and on time while maintaining a savings balance.
Only consider big purchases and investments when your debt is under control and you have a decent nest-egg in savings. Don’t jump into the stock market until you’ve done your homework on potential investments and consider hiring a financial planner to help manage your portfolio. Above all, make sure you think your investments through and always maintain a financial safety net.
Improving your financial wellbeing can be a lengthy and daunting process. However, with good planning, self-discipline, and budgeting, boosting your personal economy is within reach