Getting a handle on your finances should be an exciting adventure. Knowing where you are financially sheds light on getting where you aspire to be in the future. The journey opens the door to new possibilities for realizing your dreams and life transitions.
Small steps lead to great progress. Take a few minutes of your day or week to chart your financial path. Consider the following five big tips for building a solid personal financial life.
1. Get financially organized: Decide how you will capture your financial transactions and store your important financial documents. Finance software such as Mint.com and mvelopes.com are great tools for tracking your financial activity and reviewing your financial picture. Find charts that capture your net worth and budget/cash flow. The net worth statement shows what you own (assets) and owe (liabilities) and the difference between the two figures (net worth). A budget/cash-flow statement reveals if you are using your income to enhance your overall financial well-being.
Create an electronic filing system to save your financial statements, tax returns, policy documents and other financial-related documents. Store files on your computer or in Google Cloud. Create a list of your accounts and passwords for easy reference.
2. Maximize your employee benefits: Many employers offer favorable benefits that allow you to fund retirement, reduce medical costs, protect your income and assets through insurance, and lower other expenses through group discounts. Spend time with your human resources representative to make sure you are maximizing your options each year. Determine which benefits are portable — allowing you remain covered should you leave your job.
3. Understand tradeoffs: Being clear on your goals and priorities will help you channel your time and money to places that are important to you. A dollar can only be used once — make sure you understand what you are gaining, as well as giving up, when you use your money.
4. Find an accountability partner: Share your financial goals with someone who can help you keep your momentum. Discuss your progress regularly and commit to strengthening your financial position together.
5. Reward yourself: You deserve a reward for your hard work. Set aside a small amount each month as a “no-strings-attached” fund. Use the funds for simple pleasures that enhance your overall well-being.
Having good financial habits and practices will guide you toward a strong financial life. Keep your momentum, and enjoy the journey.