Hellen Njeri @PeopleDailyKE
Before you create a budget or make spending cuts, take the time to focus and determine what you value most. The first step to getting smart about money is to better understand how you feel about it.
Understanding your life values the inner, social, physical and drivers that impact financial decisions can help clarify goals and priorities. Have you ever wondered why you feel good about spending money on vacations, but avoid saving for retirement?
Or why you buy new golf clubs, but procrastinate when it comes to giving children an allowance? The answer may lie in your unique life values and how they influence financial decision making. Most people do not realise what’s behind the thousands of financial decisions they make every year.
And, if someone is in a relationship, you are even less certain about why your partner makes the decisions he/she does. Taking the focus with a partner or spouse will enable you to better understand each other’s financial motives and priorities together.
Make time to manage your money and time. Getting organised is an important step toward a financially fit lifestyle. This requires managing your financial documents and time.
Consider financial planning part of your normal routine. Just as you would schedule time to go to the grocery store or the gym, plan time to maintain a healthy financial life. Dedicate time each week to thinking, talk and learn about money management.
Commit 30 to 60 minutes each week toward financial planning, and talk with your spouse or partner about developing a plan together. Organise your financial documents: Get detailed information about your financial situation in order to become a strong money manager.
Collecting and organising this information in a filing system that works for you will make future financial decisions easier. Some of the documents that you should keep in an easily accessible fireproof box at home and in secure cloud-based storage include: bank statements, credit card information, investment information, insurance policies, tax returns and wills (you may choose to have your attorney keep these).
KNOW WHERE YOUR MONEY GOES
Keep track of your expenses and find spending leaks. It is possible to gain control of your financial situation, but first you must recognise where your money goes. Start by jotting down everything you spent money on last month.
Next, locate your most recent bank and credit card statements to see what you actually spent. Be sure to note everything you bought and how much it cost. Include rent, car fuel, groceries, small purchases such as coffee or snacks, and fees from the bank or credit card.
REVIEW AND REDUCE YOUR DEBT
Many financial advisers suggest that your total consumer debt should be less than 20 percent of net income. Consumer debt includes credit card payments, car loans, student loans and any other debts that you repay monthly, and does not include money spent on a mortgage, rent, utilities or taxes.
BUILD A STRONG CREDIT REPORT
Maintain a strong credit report to accomplish your financial goals. Building a strong credit history is the cornerstone of financial freedom and spending power.
For young people, it can be difficult to establish a strong credit score out of the gate and show a solid credit history that lenders take seriously. According to a recent study, young people struggle with low credit scores partially because they do not have the time behind them to establish wealth and experience.
These are some of the tips behind a strong credit record: You can set up an automatic payments, or build a credit history. You can establish good financial behaviour and finally you can get a low-limit credit card.
SAVE FOR YOUR FUTURE
Pay yourself first by saving money. That is the golden rule of personal finance. If you have worked with younger generations, one of the main conflicts is the desire to prepare for the future and save versus the impulse to live for the present and enjoy earnings now.
People know that nobody is promised tomorrow, but they also do not want to live out their retirement years with limited choices, or none at all. So how can people strike a successful balance between these seemingly competing desires?
One has to understand their cash flow and learn to say “no” by deciding on your “yes”, the clearer you are about what you want to do in the short and long term, the easier it is to make spending choices that you’ll be happy with.