Perhaps, it’s time to bring financial order into your life. Financial order, in a nutshell, means being prepared to face your financial obligations without getting stressed to the point of anxiety. Although money matters are not exactly the easiest to think about and may cause you a measure of stress, they should not overwhelm you completely.
Financial order is important. At the very least, it gives you peace of mind. It also keeps you out of trouble and helps you avoid unnecessary expenses and losses. For example, if you missed funding a check you issued by only one day, you could be paying as high as P2,500 in penalties. Same thing holds true for credit card bills.
Creating financial order in your life is possible, but it entails careful analysis of your financial standing, your consumption and spending patterns, and your personal goals. It is both a process and a goal. You have to continuously work to keep financial order in your life, and you should always aspire to achieve or keep it.
Here are some concrete ways to achieve financial order:
Keep records.
By keeping records, you will be able to keep an eye on your bills’ due dates which allows you to plan accordingly. Over the longer term, your records will allow you to monitor your spending and debt levels. There are programs available online to help you do this. If you prefer to keep records the old way, you can get a large envelope where you can file your receipts, bills, credit card and bank statements. It would be helpful to organize these regularly.
Manage expenses.
Are you going overboard with too many expenses? If you keep financial records, you will be able to pinpoint areas where you can cut back or where you can better manage your expenses. Look at areas where you may be incurring unnecessary expenses like paying for too many cable channels you hardly tune in to or gym memberships you hardly have time for.
Have a savings plan.
Once you are better able to manage expenses, you can have a savings plan. Commit to saving a fraction of your income and to add to this regularly. As much as possible, try to allocate funds for savings before you spend your regularly monthly earnings.
Pay debt.
Try to keep your debt level to a level that is comfortable. To know how much debt you currently have, calculate your monthly disposable income. This covers your take-home pay, bonuses, and all other income coming from other sources. Next, compute your monthly payments on all loans. Then, divide this amount by your monthly disposable income and multiply by 100. This will give you the percentage of your disposable income that goes into debt payment.
Protect your income.
One source of financial stress is the fear of leaving your family and loved ones vulnerable if you pass away. This is why it helps to take out a life insurance, especially if you have young children or if you are the breadwinner in your family. Insurance will also protect your assets. If you own a car, consider getting an automobile insurance. If you own property, home insurance is a worthwhile purchase.
Know your net worth.
This is an exercise that everybody should do, regardless of economic status. To know this, add up the value of all your assets (property, stocks, etc.) and income. Deduct the amount of your debt from this amount. The resulting number is your net worth. Note that this may change every year, depending on the value of your assets (e.g. share prices may change) and the amount you owe.
Once your finances are in order, you will be better able to forecast your fiscal activities, and you will be able to create realistic goals that will lead you, eventually, to financial freedom. It’s never too late to start – and 2015 is as good a year as any.
source: www.abs-cbnnews.com
