Want to take control of your money? Follow my seven step plan
Written by Adon Beddoes on September 17, 2018.
I have heard every excuse under the sun from individuals who haven’t taken control of their finances. Some say they don’t have time, others that they will do it when they are older and then there are those who simply don’t know where to start, especially if they are struggling to get by day-to-day. Many people are suffering as a result of stagnant wages and rising costs and spend enormous amounts of time looking for tips on how to save money, which is great, but they come unstuck when they try to get beyond that to look at their future financial needs and how they are going to meet them.
Are you worried about the future? If so, you are certainly not alone. I see many clients just like you. Far and away the two most common financial worries are financing their children’s further education and saving enough to sustain a comfortable retirement.
So how do you transition from simply trying to manage your money effectively to actually putting in place a sound financial plan which will help you achieve the life that you want? Breaking it down into a process of small, achievable steps is the key.
And the good news is that I’ve done the hard work for you. Here’s my simple action plan. It’s not going to turn you into a millionaire overnight, but you can start right now and make progress in just a month. Imagine how you will feel in a year and five years if you start today?
Are you ready to take control of your financial situation? Let’s go….
Step 1 – Get support
Working towards goals alone, whatever they are, is a lonely old business. Just as it is easier to exercise if you have a buddy or a personal trainer to do it, it’s easier to sort out your finances with others to keep you motivated. A two pronged attack is a good idea here – getting your friends and family on board to give support with the changes that might be necessary in your life and finding a professional financial adviser who can be your guide and chief motivator. Maybe there are even members of your entourage who might like to join you in following this step-by-step plan?
Step 2 – Know what you are trying to achieve
It is easy to think about what we don’t want – I don’t know about you but I don’t want to live under a constant cloud of money worries, to be toiling away until I am 70 or to have bad debts hanging over my head. But those aren’t things that I can work towards in any kind of concrete way. It’s much easier if you think positively about what you want for example ‘I want to have rainy day savings of x to see me through an emergency’, ‘I would like to save a pension pot of x by the time I’m 60’ or ‘I want to be debt free by the end of next year’. These are achievable goals because they are specific and measurable. So the next step is to define similar achievable goals which relate to your current financial situation. If you’ve sought professional guidance, your financial adviser can help with this.
Step 3 – Expect the unexpected, and be ready for it
You might have the most comprehensive financial plan in the world but, if you don’t have a certain amount of liquid cash available in reserve, unexpected expenses - anything from an unforeseen household expenditure to getting made redundant - could throw it off kilter immediately. That’s why I always recommend building an emergency fund as the first step towards taking control of your finances. Decide how much you need – six months of expenditure is what I usually recommend – and work out how long it will take you to save it. Keep it apart from your everyday finances but in a bank account where you can access it immediately if an emergency does crop up. I guarantee that having it there will give you an amazing feeling of security and stability.
Step 4 – Live within your means
That means getting rid of bad debt and staying debt-free. It’s worth pointing out here that not all debt is bad. A mortgage or student loan are sensible investments in the future with repayment plans tailored to your ability to pay. That’s good debt. Splurging on a $10k holiday on your credit card however is bad debt and a huge obstacle to a secure and happy financial life. If you have bad debt, formulate a plan to get it paid off, cut up the credit cards and embark on a future of living within your means.
Step 5 – Plan for the future
Next stop – the savings bus! Those financial milestones aren’t going to pay for themselves, it needs a conscious effort on your part to stop blowing every cent you earn every month and start putting a dedicated amount aside as savings. A great motivating factor is to keep coming back to the priorities that you have identified in step 2. If you constantly keep in mind the reward that you are working towards it will strengthen your resolve when you are tempted to veer off the savings path and spend.
Step 6 – Invest
Once you’ve built up a reasonable sized pot, it’s time to look carefully at where to invest it over the long term so that it will bring you a healthy return and start earning you magical compound interest. That might mean broadening your horizons beyond bank deposits and taking a step into the wonderful worlds of equities, bonds and property investments. This is where your financial adviser should really come into their own helping you to understand both the risks and benefits of different investments and finding the ones which are best suited to you based on your attitude to risk, your timescale and your future financial requirements.
Step 7 – Keep it balanced
Of course there’s not much point saving every penny for a happy future if you are having a miserable time while you do it. Life is short and true happiness is all about balancing enjoyment of life in the present with achieving your long term goals. You don’t have to sacrifice every single holiday, live like a hermit and never treat yourself to a meal out or nice new bag. The key to balanced spending is to work out what really matters to you and treating yourself to the things which make you the happiest without indulging every whim.
Although right now you may not be able to imagine a happy, healthy and wealthy you who is financially in control and confident about the future, I promise that person is just waiting to be discovered. I have seem amazing transformations in the financial circumstances of my clients when they are willing to put in the effort and tackle the steps above head on.
I’d love to help you overcome any fears that you have and put in place a plan to enable you to achieve your financial goals. Do you fancy giving it a go? If so, I’d love to hear from you at firstname.lastname@example.org.