How-to Guide to Improving Your Personal Finances in 5 Easy Steps
- 1. HOW-TO GUIDE TO IMPROVING YOUR PERSONAL FINANCES IN 5 EASY STEPS Francine Acuña Moyer
- 2. 1. Write a Personal Financial Statement • Clarify where you stand financially and start from wherever that is. – Your current financial position does not have to dictate your future. “Your present circumstances don’t determine where you can go; they merely determine where you start.” —Nido Qubein
- 3. • Gather all evidence of your personal – Assets (cash, securities, receivables, retirement funds, property, and real estate) – Liabilities (current debt, mortgage and taxes due) Downloadable ExcelWorksheets are available at http://www.getexceltemplates.com/ personal-financial-statement-template.html
- 4. • Assets consist of all items that contribute to your wealth: – Cash – Investments – Personal Property – Retirement Accounts – Accounts Receivable • Any money that is legally owed to you
- 5. • Liabilities are your obligations to pay out money: – Mortgages – Bills – Loans – Current Unpaid Taxes “It is in building the best of our abilities that we ultimately destroy the worst of our liabilities.” ― Craig D. Lounsbrough
- 6. • Subtract the sum of your liabilities from the sum of your assets to determine your net worth, your starting point. – Most starting out do not have a “net worth.” The goal is to build one. Total Assets – Total Liabilities = Net Worth
- 7. 2. Establish Your Financial Goals • Your ultimate goal is to increase your list of assets and decrease your liabilities. • If you aspire to travel or buy an expensive car, the power to do so is within your grasp. – You simply need to reprioritize your spending and saving habits. “You can’t be in debt and win. It doesn’t work.” —Dave Ramsey
- 8. 3. Create a Plan of Action • Develop a budget that focuses on eliminating your liabilities. – Two common strategies are to 1. Pay off your smallest debts first (Irby, 2018; Ramsey, 2017), or 2. Focus higher payments on those with the highest interest rates (Steinberg, 2017).
- 9. • Regardless of which strategy you choose, pay more than your minimum balance whenever possible to decrease interest expense. – You may even find that creditors are willing to reduce interest rates or offer discounts for early payoff. Talk to them. • Change your spending habits. – Curtail frivolous spending; if you don’t really need it, don’t buy it. – Once your debts are paid, save and invest. When in doubt, seek the advice of a trusted financial advisor.
- 10. 4. Follow Your Plan • Sometimes, it’s easier to know what to do than it is to do it. – Take on one new habit at a time, if necessary. Once you reap the benefits of more mindful practices, it will become easier to take on more financial responsibility. You may even find it enjoyable!
- 11. 5. Adjust Your Plan as Necessary • Life’s events can be unpredictable. Changes in income, marital status, and health are just some of the things that warrant reevaluation of your financial situation. – When this happens, return to the first step of this process to determine, once again, where you stand.
- 12. • If a change results in greater income, keeping with the same plan can be a great disservice to your financial health. • On the other hand, if you’ve been laid off, or you’ve recently been hit heavily with medical bills, cutting back on your savings may be necessary. – Remember that it’s just a temporary setback. Once you clear the hurdle, reevaluate and adjust accordingly. You can do this!
- 13. Excel Templates. (2018, June 19). 8+ personal financial statement templates. Retrieved from http://www.getexceltemplates.com/personal-financial-statement-template.html Goodreads, Inc. (2018). Liabilities Quotes (8 quotes). Retrieved from https://www.goodreads.com/quotes/tag/liabilities Irby, L. (2018, June 18). How to pay off high interest rate debts. Retrieved from https://www.thebalance.com/how-to-pay-off-high-interest-rate-debts-960842 Qubein, N. (2018). Nido Qubein Quotes - BrainyQuote. Retrieved from https://www.brainyquote.com/authors/nido_qubein Ramsey, D. (2017, November 15). How the debt snowball method works. Retrieved from https://www.daveramsey.com/blog/how-the-debt-snowball-method-works Ramsey, D. (2018). Dave Ramsey Quotes - BrainyQuote. Retrieved from https://www.brainyquote.com/quotes/dave_ramsey_520282 Steinberg, S. (2017, May 10). 10 easy way to pay off debt. Retrieved from https://money.usnews.com/money/personal-finance/slideshows/10-easy-ways-to-pay-off-debt References