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6 Important Tips for Getting Your Home Finances in Order

6 Important Tips for Getting Your Home Finances in Order

When it comes to financial issues, people tend to get a little edgy, and rightfully so. There is plenty of advice out there that is somewhat unrealistic or takes things to an extreme (things like cutting costs by only having one vacation a year or firing your driver don’t exactly apply to the average citizen). At the same time, focusing on comical penny-pinching at the expense of basic human dignity—e.g. not flushing when you go to the bathroom, like some people advise—won’t make much of a difference anyway. Such advice only leaves you frustrated because online advice columns seem to mistake average working and middle class people, who have a lower income and want to make the most out of their pay check—with down-on-their-luck hobos.

The truth is that there are some changes you can make that will make a big difference in terms of your home finances, without sacrificing much in the way of comfort. I won’t lie to you—it takes a decent amount of self-control, planning and some effort to get your finances in order, but with a good strategy you won’t be giving up much.

1. Find a big, useful goal or item that is worth saving money for.

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Setting a goal

    It’s difficult to get yourself on board with spending less and putting some money aside if you don’t have a good goal in mind. You need to look for an effective source of motivation, something that will be in the back of your mind every time you think about making impulsive purchases. This can be something like a great vacation on a tropical island, a new car, home renovation or moving into a bigger house. The thing is, you can combine different goals, even something that’s not directly related to money—e.g. if you spend less money on sweets and soda, you will lose weight and have more money. You should always have that big goal in mind and think about how the money you want to spend on insignificant things in the spur of the moment can actually bring you a step closer to what you really want.

    2. Make paying off your debt a priority, but choose a good strategy.

    You can’t really take control of your finances until you have managed to free yourself of debt. This might seem like a long and arduous journey, and it is, but it can be done in a reasonable amount of time. First of all don’t fall for those minimum payments as they are designed to keep you in debt for a long time. Second, you have good strategies like snowballing, where you start paying off smaller debts first while keeping the rest at minimum payments, and you even have online tools available to help you out. It is important to exercise a little bit of control when it comes to spending money during this strategy—you don’t have to say goodbye to luxuries; just don’t go above your means and buy only what you can afford with the money that’s left over from the bills and payments.

    In case you are facing a lot of debt that you don’t know how to handle, you may need to negotiate with the creditors or even try a debt-settlement program. Make sure you do some research and find reputable companies that offer a good and reasonably priced service, as there are plenty of frauds out there that are only after your money. So, there are plenty of options for everyone, even in worst-case scenarios.

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    3. Start doing DIY projects around the home instead of going to the store.

    You’d be surprised at how many things you can fix, improve and make yourself around the house and save a lot of money on repair bills, cleaning products, new furniture, decorations and much more. It is fairly cheap to caulk windows and make small repairs. This combined with adding thick curtains and draft protectors can help you save some money on heating bills and keep you warmer in the winter. An old piece of furniture can be made to look brand new with a bit of glue, sandpaper and a paint job—I’ve had friends ask about my cool new table, after I had worked over the table that was sitting in the living room for 10 years and had put some wood grain print decorative paper on the top. Most of these projects are cheap and require nothing much than some hard work and creativity, yet they can look incredibly good.

    4. Plan your shopping carefully and stock up on what you need once a week or once a month.

    Shopping for groceries

      No one says you can’t go to a restaurant from time to time—just make it a less expensive one for the time being—or order a pizza. However, stocking up on food has its advantages. You will always have something in the fridge and pantries when you’re hungry and you won’t have to make trips to the store in the middle of your quiet time, which means you’ll also save some money on gas. You can go online and find some cost-effective brands for any type of food you need, complete with nutritional facts for the health-conscious.

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      There are also sales and special offers at stores you can check out online, as well as coupons that can be printed out. Buying in bulk can also get you a discount, and making fewer shopping runs and buying in advance can also help you manage your budget a bit better. Plan a big weekly store run for most of your groceries, and a monthly or even bimonthly run for household chemicals, hygiene products and canned goods.

      5. Cook your own food, and cook it in bulk.

      Take a page out of the bodybuilder playbook and start preparing your own food. It’s much cheaper to get a bunch of ingredients and prepare a dozen tasty meals than it would be to eat twelve meals at a restaurant. You have plenty of great recipes and cooking tutorials online, so it’s not all that difficult to become a decent cook with a month or two of practice. Cooking plenty of food at once and then keeping it in plastic containers in the fridge allows you to prepare enough food for the next 3–4 days in one go. This is great for healthy lunch recipes that feature fish, chicken or ground beef, combined with a whole lot of vegetables. Frozen vegetables are just as nutritious as fresh ones, and can be cooked fairly quickly.

      Not only will you be saving time and making sure there’s always a tasty and healthy meal ready to go, but you will be saving money on your electricity bill as you won’t be cooking all that often—you can prepare enough food for several days in about 60–120 minutes. If you’ve stocked up on food, it also means that you can throw together a sandwich or make some mac and cheese quickly when you want a bit of a change.

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      6. Go green and start caring about the environment.

      Green earth

        Yep, being a green-minded hippie can actually pay off. Caring about the environment is all about recycling, not letting the water run all the time while you shave or apply your shower gel in the shower, turning off the lights and TV when you’re not using a room, not heating up the house to tropical temperatures in the winter, being careful about your car’s emissions and so on. You might also recognize these things as some of the most common energy-saving and frugal living tips. Just start being more or less eco-conscious and you will soon notice that you are saving a decent amount of money; plus you’re being fashionably green instead of cheap in everyone’s eyes.

        Putting the reins on your spending and taking control of your finances is not a project—it requires a few major long term lifestyle changes. You simply can’t get around that fact or make things easy. What you can do is find the right motivation, create a good strategy that ensures that you will be covering your basic costs of life, slowly paying off your debt and setting some money aside, all while not entire giving up the comfort that you are used to. It’s just a matter of getting used to a different way of thinking and making smarter choices.

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        Ivan Dimitrijevic

        Ivan is the CEO and founder of a digital marketing company. He has years of experiences in team management, entrepreneurship and productivity.

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        Last Updated on September 2, 2020

        How to Set Financial Goals and Actually Meet Them

        How to Set Financial Goals and Actually Meet Them

        Personal finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. That’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

        In this article, we will explore ways to set financial goals and actually meet them with ease.

        4 Steps to Setting Financial Goals

        Though setting financial goals might seem to be a daunting task, if one has the will and clarity of thought, it is rather easy. Try using these steps to get you started.

        1. Be Clear About the Objectives

        Any goal without a clear objective is nothing more than a pipe dream, and this couldn’t be more true for financial matters.

        It is often said that savings is nothing but deferred consumption. Therefore, if you are saving today, then you should be crystal clear about what it’s for. It could be anything, including your child’s education, retirement, marriage, that dream vacation, fancy car, etc.

        Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives that you foresee in the future and put a value to each.

        2. Keep Goals Realistic

        It’s good to be an optimistic person but being a Pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going beyond what you can realistically achieve will definitely hurt your chances of making meaningful progress.

        It’s important that you keep your goals realistic, as it will help you stay the course and keep you motivated throughout the journey.

        3. Account for Inflation

        Ronald Reagan once said: “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman.” This quote sums up what inflation could do your financial goals.

        Therefore, account for inflation[1] whenever you are putting a monetary value to a financial objective that is far into the future.

        For example, if one of your financial goal is your son’s college education, which is 15 years from now, then inflation would increase the monetary burden by more than 50% if inflation is a mere 3%. Always account for this to avoid falling short of your goals.

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        4. Short Term Vs Long Term

        Just like every calorie is not the same, the approach to achieving every financial goal will not be the same. It’s important to bifurcate goals into short-term and long-term.

        As a rule of thumb, any financial goal that is due in next 3 years should be termed as a short-term goal. Any longer duration goals are to be classified as long-term goals. This bifurcation of goals into short-term vs long-term will help in choosing the right investment instrument to achieve them.

        By now, you should be ready with your list of financial goals. Now, it’s time to go all out and achieve them.

        How to Achieve Your Financial Goals

        Whenever we talk about chasing any financial goal, it is usually a two-step process:

        • Ensuring healthy savings
        • Making smart investments

        You will need to save enough and invest those savings wisely so that they grow over a period of time to help you achieve goals.

        Ensuring Healthy Savings

        Self-realization is the best form of realization, and unless you decide what your current financial position is, you aren’t heading anywhere.

        This is the focal point from where you start your journey of achieving financial goals.

        1. Track Expenses

        The first and the foremost thing to be done is to track your spending. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you will be surprised by how small expenses add up to a sizable amount.

        Also categorize those expenses into different buckets so that you know which bucket is eating most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pumping up your savings rate.

        If you’re not sure where to start when tracking expenses, this article may be able to help.

        2. Pay Yourself First

        Generally, savings come after all the expenses have been taken care of. This is a classic mistake when setting financial goals. We pay ourselves last!

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        Ideally, this should be planned upside down. We should be paying ourselves first and then to the world, i.e. we should be taking out the planned saving amount first and manage all the expenses from the rest.

        The best way to actually implement this is to put the savings on automatic mode, i.e. money flowing automatically into different financial instruments (mutual funds, retirement accounts, etc) every month.

        Taking the automatic route will help release some control and compel us to manage what’s left, increasing the savings rate.

        3. Make a Plan and Vow to Stick With It

        Learning to create a budget is the best way to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be organized

        Nowadays, several money management apps can help you do this automatically.

        At first, you may not be able to stick to your plans completely, but don’t let that become a reason why you stop budgeting entirely.

        Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options, and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

        You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

        4. Make Savings a Habit and Not a Goal

        In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that, in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

        Make savings a habit rather than a goal. While it might seem to be counterintuitive to many, there are some deft ways of doing it. For example:

        • Always eat out (if at all) during weekdays rather than weekends. Weekends are more expensive.
        • If you are a travel buff, try to travel during off-season. You’ll spend significantly less.
        • If you go shopping, always look out for coupons and see where can you get the best deal.

        The key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice, which will be harder to sustain over a period of time.

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        5. Talk About It

        Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission.

        Therefore, in order to stay the course, surround yourself with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

        6. Maintain a Journal

        For some people, writing helps a great deal in making sure that they achieve what they plan.

        If you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

        When you have a written commitment on paper, you are going to feel more energized to follow the plan and stick to it. Moreover, it is going to be a lot easier for you to track your progress.

        Making Smart Investments

        Savings by themselves don’t take anyone too far. However, savings, when invested wisely, can do wonders.

        1. Consult a Financial Advisor

        Investment doesn’t come naturally to most of us, so it’s wise to consult a financial advisor.

        Talk to him/her about your financial goals and savings, and then seek advice for the best investment instruments to achieve your goals.

        2. Choose Your Investment Instrument Wisely

        Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about the common ones, like a savings account, Roth IRA, and others.

        Just like “no one is born a criminal,” no investment instrument is bad or good. It is the application of that instrument that makes all the difference[2].

        As a general rule, for all your short-term financial goals, choose an investment instrument that has debt nature, for example fixed deposits, debt mutual funds, etc. The reason for going for debt instruments is that chances of capital loss is less compared to equity instruments.

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        3. Compounding Is the Eighth Wonder

        Einstein once remarked about compounding:

        “Compound interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.”

        Use compound interest when setting financial goals

          Make friends with this wonder kid. The sooner you become friends with it, the quicker you will reach closer to your financial goals.

          Start saving early so that time is on your side to help you bear the fruits of compounding.

          4. Measure, Measure, Measure

          All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments and taking stock of how our investments are doing.

          If we don’t measure progress at the right times, we are shooting in the dark. We won’t know if our saving rate is appropriate or not, whether the financial advisor is doing a decent job, or whether we are moving closer to our target.

          Measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

          The Bottom Line

          Managing your extra money to achieve your short and long-term financial goals

          and live a debt-free life is doable for anyone who is willing to put in the time and effort. Use the tips above to get you started on your path to setting financial goals.

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          Featured photo credit: Micheile Henderson via unsplash.com

          Reference

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