Managing your finances can be one of the biggest challenges in life. In fact, many people end up going their entire life without a plan and just wing it the best they can. This can lead to a sort of “feast and famine” cycle in which they have lots of money to burn at times, but are barely scraping by at others. Let’s take a look at five ways strategic financial management can help you to attain a more stable financial balance, and live better.
- Planning out a Budget and Sticking To It
You probably hear this a lot, and maybe you’ve even tried having a budget before. It’s not easy, and can even be a little scary since you’ll be keeping a close eye on how much money you have to spend. This can add extra stress upfront, but you will find that it’s less stressful overall since you’ll never be surprised by having a lack of money when you need it.
Budgeting your life is pretty simple. You simply write down all the things that you spend money on, and all the things that make you money. For most people, the making money part will come primarily from their job, but stocks that pay dividends, and side businesses can also contribute. As for the money you spend, the essential bills will be first on the list, with nonessential coming next.
Once you have your budget planned, the next challenge is being able to stick to it. As a general rule, once you violate your budget planning once, you’ll be tempted to do so again. This makes it extra important to never make that first mistake to give in and make an impulse purchase.
- Life Insurance
Believe it or not, smart financial planning also takes into account unforeseen accidents, and/or deaths. While it might not be pleasant to think about, the consequences to your family if you’re the main provider can be devastating if you were to pass away unexpectedly.
This problem is easily countered by purchasing term life insurance. This way if something happens to you, or the main provider in your household, your family will be okay financially. If you haven’t looked into getting life insurance yet, make it a point to do so as soon as possible.
- Avoid Using Credit, and Pay Off Debts
Let’s be honest here, the interest you pay on your debts is just wasted money that brings you literally no value. If you have debt from credit cards, mortgages, loans, and other sources, you’ll be doing your self big favour if you pay it off as soon as possible. It may feel uncomfortable paying a lot of money all at once, but you’ll be better off in the long run since you won’t be wasting money paying interest anymore.
The flip side to this is to avoid using credit as much as possible. While you may have to do so in order to make major purchases, such as your home, and vehicle, there is no reason to use credit for everyday items or impulse purchases. A general rule to follow is that if you need to use credit or take alone to buy something, you can’t afford it, and shouldn’t be purchasing it in the first place.
- Control Impulse Purchasing
Speaking of impulse purchasing, this is one of the biggest problems when it comes to smart financial management. Considering all the marketing and ads we’re bombarded with these days, it can be hard not to buy stuff on a whim. Our entire society is heavily focused on consumerism so there is always someone somewhere trying to get you to buy something.
The best way to deal with the urge to spend money outside of your budget can best be dealt with by setting aside a certain amount of money each month for impulse shopping. The great thing about this is that the amount can roll over at the end of the month, allowing you to build up your stockpile of impulse shopping funds, and go on a splurge if you feel the need to at some point.
- Hiring a Financial Adviser
While this may seem like overkill, a financial adviser can help with a lot of things, not just budgeting, or getting the right life insurance. They can also help you make smart decisions on how to best invest your extra capital, and how you can improve your credit score.
When hiring a financial adviser just keep in mind that this should also be an investment. You want to make sure that the money you’re paying your adviser is being made back through the actions you take according to this individual’s guidance. Think of this as an investment, and treat it as such, and your financial adviser will be a huge asset to your strategic financial management.
