I have always been raised with the mindset that you need to save for emergencies. This has made me very responsible with my money. However, it was after I moved to Canada from the Caribbean that I realized how challenging it can be to handle your finances. That was the moment that I began searching for more information and learned that I knew nothing about money. These are some of the things I learned:
Budget
Now as I said, I was really good with saving money, but I never had a real budget. Once I started getting mandatory expenses, I realised that I needed to be in control of what goes in and out of the household, in order to get a grip on the amount we can save in a month. Enter the budget. It is a great way to have a proper overview of your finances, plus it can help you find ways to lower your expenses even more, having more money left for other things.
Pay off debts
Many people do not realize how having a debt can affect your credit score. With debts, it is important to make payments on time. When you miss a payment, there is a big chance that this will be reported to the credit bureaus. If you only have one credit card, make paying your credit card a priority. Check what you have left after budget and make the biggest payment you can and pay this off as soon as possible. If you have multiple debts, check the one with the largest amount of interest and pay that off the fastest and work your way through all of the debts in this order. Interest is what most people will struggle with, as it grows rapidly without you even realising it.
Pay yourself first
This is a golden oldie rule that has helped me a lot since I discovered it. Once you have made your mandatory payments, you set aside a portion of money and do not touch it. Consider it part of your mandatory payments to “pay yourself”, before you spend it on useless stuff. After some time of continuous growth, you will start to see a difference in your bank account for the better.
Build an emergency fund
Being able to cover unexpected expenses is an important thing to do if you want to take control of your finances. We all know that life happens, but we need to be prepared for this. The ideal emergency fund they say is between 3 to 6 months of your monthly expenses, but really anything is better than nothing. Strive for those six months, but take it step by step, so that you’ll actually continue with building that fund instead of feeling overwhelmed.
Invest in your future
Set goals that you would like to accomplish and work towards it. Is it a house, a new car or your retirement? It is good to have something to work towards, as it makes for a driven person. You can save by active or passive means. Traditional work or investing. This is when you invest your money in bonds, stocks, mutual funds or real estate for example. Before doing anything please consult a financial advisor, as it does come with its risks.
It takes time and commitment to take control of your finances. When it comes to money ask the right questions and be actively engaged to learn. Check seminars, workshops and online courses. There will always be something new to learn. And frankly, most people will not realise this, but finances is an integral part of our lives, so why not get familiar and take control of it?
