Some people consider money problems as inevitable. Everybody experiences financial struggles at some point of their lives, some even experience it for the most part of their lives. One reason why most people fail to progress financially is because they do nothing about their current situation, or if ever they do something, they are either doing the wrong thing or making an inefficient choice.
Resolving money problems is simple, but not easy. The concepts about financial planning and management are fairly easy to understand, but difficult to apply and follow. That is why though many people know how to dig themselves out of the financial traps that are affecting them and their families, only a few succeed and become financially independent and secured. Below are ten very simple and practical tips on how to resolve money problems.
1.) Assess your current situation. There is no better way to start than to know where to start. You can’t set financial goals and draft a financial plan if you don’t know your current financial situation (how bad is it really?). Do you have existing debts? Is your income enough to support your basic needs and some wants? Are you spending too much? Can you save regularly? One very efficient way to assess your current financial situation is to write everything down. Write down your sources of income and write down your recurring expenses such as utility bills. Be detailed and included even the petty expenses such as cigarettes and drinks. You might be shocked that these “small” expenses can sum up to a very huge amount.
2.) Increase your cash flow. By far, the most practical and direct way to solve money problems is to increase the money that is coming in. The best time to make more money is during your spare time thus if you are working, try to think of ways to earn additional income after your working hours. Some of the most popular ways to earn additional income or to increase cash flow are starting a business and investing.
3.) Eliminate, manage, and if possible, avoid debt. Debt can make you go down fast into the financial drain. If you won’t eliminate or at least manage debt well, it will create a life of its own. One of the most common reasons why people go down in debt is credit cards. Credit cards normally have hidden fees and high interest rates. If you use your credit card a lot, avoid paying the minimum amount only but rather pay more. Paying the minimum amount makes you pay the interest rate but not your debt. It will make you pay more than you should. If you have an existing debt, prioritize it and get rid of it fast.
4.) Draft a financial plan. Goals are important in achieving success. A goal will give you a sense of direction and give meaning to the things that you do. In dealing with your finances, a goal is as important as it is in other aspects of life. If you have a goal, your money will be much more valuable to you and you can allocate it more effectively rather than spending it all out. A goal will also spare you from falling into financial problems later on. If you just execute your plan well, rest assured you’ll achieve financial independence in no time.
5.) Create a budget. A budget is a concrete plan for your goal. It makes you see what is important and at the same time will serve as a reminder in case you go a little astray in your financial goals. A budget can make you much more efficient in terms of your finances. As much as possible, make a budget even to the most simplest of things, be detailed as much as possible. A budget can keep you from buying things that you don’t need. Most people fail into this trap because they are halfhearted when it comes to budgeting. They make and bring a budget when they go to groceries but they don’t have one when they go shopping making them buy things that they really don’t need and regret later on.
6.) Manage your finances well. Exert some time, effort, and focus on managing your finances. Most of the time, the reason why your finances go chaotic is not because you don’t know how to deal with it but simply because you lack focus. How many times have you bought something out of your budget? This is because you let your emotions run over you and make you lose your focus and make you forget about your goals. Make it a point to prioritize your finances. Gradually discipline yourself by not buying a lot of things and sticking to your budget. Be patient with yourself when it comes to managing your finances. Things will not change overnight. If you’ve been spending a lot before, don’t expect to be thrifty tomorrow.
7.) Seek help. Talk and ask family members and friends about possible solutions. Most of the time, they can offer solutions and even earning opportunities to you. People have different opinions and you may need all of them or at least most of them. Other people’s opinions can provide enlightenment to you and may help you a lot. A word or two may have the capability to change the way you think about money. If really necessary, seek professional help. There are a lot of professional financial planners that provide financial services but for a fee. Don’t fret because there are some really good planners that do it for a very minimal amount, some sort of advocacy on their part.
8.) Develop the habit of saving. Saving is a lost art. You may have a piggy bank when you were still a child but you spent it all after buying a toy or a dress. People are taught to save and to spend making saving not so relevant because you’d still lose your money sooner or later. Rather than saving and spending it after, save and invest it. Investing means making your money grow. Put your money on money generating tools such as mutual funds, stocks, bonds and other securities, and if you will have more spare money soon, maybe in real estate. No matter how small it is, a penny saved is a penny earned and it is a penny reduction to your responsibilities and is also a penny addition to your future. The more penny you save, the more secure your financial foundation is.
9.) Increase your financial IQ. The best person to manage your finances is no other than yourself. Professional fund planners and fund managers may make your money grow but they may earn more than you do from your money. Increasing your financial IQ will make you see what things do you really need. Enroll in financial management and planning classes, read books and articles, and join seminars and conferences. These things can definitely increase your financial IQ and can help you a lot in your resolving financial problems.
10.) Build the right financial foundation. Assuming that you’ve already assessed your financial situation, have a goal, made a financial plan, and already eliminated and managed your debt, it’s time to start building your financial foundation in a very secure way. The basics of building the right financial foundation are, investing in health care and insurance, debt management, establishing an emergency fund, investing, and protecting your estate or investments. Health care and insurance are both income protection tools which will provide you and your loved ones an income protection in case the bread winner dies or loses his or her income generating capacity. Debt management is actually more of making debt work in your favor. There are two types of debt, good debt and a bad debt. A good debt is a debt that can give more money in your pocket while a bad debt takes more money from your pocket. An emergency fund is important because it will provide you money in case of emergencies. Investments come in last because they are intended for long term. Investments take time to grow and must be left for years.