New perspectives: How to be a better steward of your finances
Do you know where you are going financially? Or do you feel out of control? Discover how to take control of your finances – and your life.
We’re not entirely sure when we’re going to be able to say the pandemic has passed or what it’s going to feel like to greet our favourite waiters or grocery store staff and recognise their faces again, but in case you didn’t know it yet: that’s not likely to be anytime soon.
That means that we have to keep on evolving, always moving forward – never looking back. One of the most significant impacts of this awful pandemic on the global population has been how the effects of lockdowns, etc, have decimated local and international economies.
So while we’re taking the time to acknowledge the journey, we find that it’s best one not tarry there and instead focus on building a future with the foundation of lessons learned.
For many of us (hint, hint), that means learning from some painful mistakes of the past. But here’s the “thing” though, no one is a born financial expert and save for the tiny percentage of people who just seem to know how to balance the chequebook, most of us will have to be taught by the university of life.
So, where to begin? How do you start sorting out a financial mess that you may be going through? How do you consolidate your debt and make more intelligent and better decisions that prevent you from going there again?
Now, these are all excellent questions, and we’re going to unpack them in a little more detail, but perhaps the most important question before answering any other should be: Where am I going (and more to the point, is it where I really want to go?).
Okay, let’s get cracking!
First off, let’s begin by acknowledging that clearly, not everyone is at the same place in their lives as anyone else, and means that some of this advice may seem hugely relevant to you and some of it less so. But there is a solid base from which to start from here, and that’s what we’re really after here. A place to begin, a space to gain a clear understanding of your current circumstances and then a way to create a plan for you to arrive at where you’d like to be.
So before you even start unravelling and working through whatever state your finances may be in right away, think first about where you want to end after this process? Bearing in mind that good financial stewardship is an ongoing process, in the knowledge of its dynamic, natural state, there has to be an outline of sorts to be your compass. It is that same compass that will become your living document – your ongoing personal financial management plan.
So, how do you begin? First up, take a moment to step back, clear your thoughts and take some time for yourself far from the madding crowd where you can focus your thoughts and give due attention to your relationship with money. Where would you like to be a year from now? Three years after that? Five years after the first year? We are, of course, referring to the infamous five-year plan. (You can get some ideas on how to create a good one, here)
Let’s break it down
We’ll keep it simple. Envision what the end of next year this time looks like for you. How you’d like it to look – but do take care to be realistic, mind you. If you need some help separating your thoughts, use the SMART method:
- S Specific
- M Measurable
- A Achievable
- R Realistic
- T Time-bound
So while you’re visualising what you want your end of 2022 financial footprint to look like, you want to start thinking about how you’re going to get there. Just as a matter of interest, it takes the average Brit around three years to become completely debt-free (excluding your mortgage), so beware – this isn’t going to be a quick fix.
And how do you start this magical plan? Gird your loins, ladies, the two words that kill more weekend frivolity than any other: A BUDGET!
No matter what goals you have, your five-year plan, whether it’s educational, romantic, career-wise, whatever it is – you are going to have to start by knowing where you’re at right now and before you can even think about your mid-term plan, we need to get you to the end of 2022 in a stronger position to plan for 2023 and so on.
So that means downloading a budget template that works for you and getting to it. That is, without a doubt, your most potent tool, and even if it takes some painful realisations and conversations, it absolutely must happen.
So now you know where to start, what next?
OK, you’ve had the tough conversations; now you need to get to grips on how you’re going to handle it and here’s where you’re going to need some bravery as well.
Call your creditors. Every one of them and speak to them. Find out if they have a debt counsellor or relief package that you can take advantage of; most countries in Europe have them, so even if you’re not in the UK, find out who your local debt counsellors are and speak to them.
Find out if you can renegotiate interest payments and if they can arrange a payment holiday so that you have time to recover – you’ll be amazed at what you could get if you just asked for it.
After speaking with all your creditors, you should now have an accurate idea of where you are and what needs to happen next.
Managing your income and creating more
Clearly, you need to manage your cash flow now and critically, identifying areas where you could earn some more. Do a self-audit to see if you have any marketable skills that you could turn into a side hustle or if you have property, do you have enough of it to lease some of it out to create rental income?
If you live in the country, do you have sufficient space to erect a Field Shelter that you can turn into storage space or even an area where appropriate small businesses could rent that space from you?
Creating a passive income means thinking out of the box, and an ever-increasing amount of us are starting to do it. Every single extra penny that you can pay over into your principal debt will ultimately reduce your settlement value and, with that, save you potentially thousands in interest.
Take care when starting a new business, and don’t make snap decisions.
Bringing it all together
It all starts with a plan and being brutally honest about it. Everything else that happens after that becomes possible because you invested time knowing how to start strong.
As women, we have to continue our drive towards total independence, which cannot happen without financial freedom first. Good luck!
Photo by Stormseeker