How to start taking control of your personal finances? Three Critical Action Items
These are the 3 key areas to start developing your personal finances
Financial Goals
Start out by defining what your financial goals are. The different time horizons to consider should be: short term, mid term, and long term.
Budgeting
Create a budget by analyzing the current month to month cash flow. Calculate monthly expenses and monthly income in order to acquire an accurate financial snapshot of your situation.
Emergency Fund
Establish an emergency fund to always have available. This is the first foundation of a strong financial standing.
Purpose for financial goals
To best be able to define your financial goals you first need to define the purpose behind your financial goals. Having a clear ‘why’ behind your objectives will provide the resolve to achieve these.
budgeting = your wealth building tool
By budgeting correctly, using all of its tools, you will be empowered and thus able to achieve your short, mid-term and long-term financial goals. Budgeting is the initial tool to build your financial wealth.
Financial foundations
Your emergency fund is the first and most essential foundation when your starting to build your wealth. It enables you to have strong financial health and move steadily towards your financial goals.
The secret to defining financial goals
Clarify Purpose
What do you want for your life? What do you consider a necessity and what do you truly want to achieve?
Establish Time Horizons
Although knowing exactly how life will develop in the future is pretty hard, having a pretty good idea of what you desire financially and at what stages of your life is the perfect way to establish a financial blueprint to follow and exceed.
Budgeting is a critical wealth building tool
Calculate monthly cash flow
Although tedious, calculating your monthly income and expenses is vital for acquiring control of your finances. It will provide an inmediate financial snapshot of your monthly finances.
Analyze Incomes & Expenses Categories and Adapt Them In Relation To Financial Goals
By consequence of calculating your monthly cash flow, you will know exactly where your money is coming from and where it is going. It is essential to also recognize that these categories are adaptable and in your control.
Emergency Fund. The First Layer Of Your Financial Foundation
Build Your Emergency Fund
By budgeting effectively, you will be empowered to start building your financial foundation. The first foundation needs to be your emergency fund.
Understand Your Situation, Control The Flow Of Your Emergency Fund
Recognize that your emergency fund does not have to remain still. If you have a good understanding of your livelihood situation, then you can use your emergency fund to fund your other projects and maximize your financial position.
