You are not the first to face your financial problems and you will not be the last.
Financial problems can be of 2 types:
- At source (your job or how you make a living)
- Downstream (Your cash outflows)
Take your time. Breathe. Sit down, set aside a few hours and start your financial self-assessment.
Understand and quantify your assets (home, bank accounts, stocks / securities, etc …) and your liabilities (mortgages, debts, etc …).
Only track assets that you can actually monetize and track them at their expected value.
If you have a house and use it to live in it and you can’t even rent a sofa as a bed, don’t include it. It is true that in case of need you can sell it, but if you have not done this so far then it was not necessary.
Produce your Net Worth document: Assets – Liabilities
Your Net Worth is a number that tells you “where are you” on the financial path.
If you are below zero it means that you have more debt than assets. It means that you have nothing, because what you have may be taken away from you.
Be quiet, you can always improve and there is nothing wrong with starting with a low grade.
Composition of your situation
Try to understand if your Net Worth is increasing over time and how it is structured.
- Where do your earnings come from?
- Where do you spend your money?
Keep track of your data. Now a lot of apps help you understand where you spend and you can link them directly to your bank accounts.
They can give you tips and show you graphically how your account is doing. Seeing the data graphically always helps more than the number itself.
Understanding all of this is essential.
Now try to figure out how to improve your financial problems
To help you, you have to work both from the point of view of income and expenses.
You may have a job. May you have other income streams or potential income streams such as business ideas. or Skills? Passions? Professional network?
You might have seen from the point earlier how you are spending your money and you should look for ways to save as much as possible.
Where do you want to go and what you can improve to reach it?
Pay your debts, always start with those with the highest interest rates.
Once you start to have some cash aside each month you can start solving your first financial problems.
So kill your debts as a first priority once the before mentioned steps have been taken. As a nice side effect, paying off your debts will reduce your total monthly expenses and improve your cash flow and savings rate.
Once no debt is chasing you you need to find other ways to make money out of your money. You have to invest.
Investing is highly country specific. Find out about the taxation, opportunities and synergies of your country.
You can actively invest your time and energy alongside your money to hope for a greater return or, as I would suggest to beginners, simply go passive and join a fund.
You don’t have to choose just one, you can differentiate to reduce the risks.
And finally, invest in yourself! It can bring you greater returns than any other investment.
Once you have reached your goal, relax and enjoy it.
You deserve it as it will have taken you years to reach it.
No bonus link today!
But I leave you a good metaphorical image with this post 👇