LEADERS COMMUNITY STIE IBMT Surabaya – Whether you are a millionaire or rank among the ordinary middle-class, there is always room to improve your finances. But beware: there is no quick fix to revamping your financial life; instead, it requires careful planning, patience and discipline.
Financial planning may not sound fun, but it is an essential part of your life, much like your health.
Here are five ways to improve your financial condition in 2018 and in the coming years.
1. Review your current situation
How can you improve your financial situation without knowing its present condition? Comb through your current finances, including credit card debts, bank loans, mortgages, monthly expenses, savings, taxes and investments. The purpose of this review is to determine your financial net worth.
You don’t need to be an economics professor or charted accountant to calculate your net worth. Net worth is simply what you have minus what is owed. In other words, you just need to deduct your liabilities, such as loans and debts, from your assets, including your house, car and any investments.
Find out how much debt you have and the amount of monthly payments you make for each of your debts. Also, find out your retirement plan contributions. How much is your monthly income? How regularly do you contribute to your savings? This careful review will help you determine if your financial situation appears to be on track or not and plan accordingly.
2. Avoid bad debt
The rule of thumb for maintaining a healthy financial condition is to avoid non-value-added debt, or bad debt that generates zero or negative returns.
For example, using your credit card to buying clothes, smart phones, electronics or big-ticket purchases like furniture is a classic example of bad debt. Credit card debt only gets expensive over the course of time, as the interest rates are quite high and continue to accumulate month by month.
The bottom line is, avoid indulging in purchases you cannot afford, especially using your credit card – or credit cards. Purge your online shopping frenzy. You don’t have to spend lavishly on clothing, accessories and gifts when you are already in considerable debt. Unsubscribe from the e-commerce newsletter and delete e-commerce apps from your mobile phone. Buy what you need, not what you want.
Try to first pay off the bad debts that carry the highest interest rates. Make it a point to pay all your monthly dues promptly. It will not only prevent you from getting charged for late payments, but also reduce the risk of pilling up bad debt. Getting rid of personal debts can be difficult. If necessary, try talking to a credit counseling firm.
3. Don’t put all your eggs in one basket
Once you have reviewed your current financial situation, the next step is to sketch out a financial plan. Savings, as well as investments, play a critical role in your financial planning. With proper management, you can turn investments into additional sources of income. Fortunately, the throbbing Indonesian economy can provide you with several different investment options.
Conservative investors can invest in gold in the form of jewelry or gold bullion. Online jewelry stores such as Bluestone offer certified and intricately designed gold jewelry, making this investment option more accessible and attractive. Alternatively, you can also put your money into savings accounts, time deposits, government bonds, mutual funds and stocks.
Cryptocurrencies such as bitcoin are also a solid investment option if you are willing to go the extra mile. For long-term investment, consider buying housing or land. You can also invest in online crowdfunding sites, earning as much as a 20 percent return on your money. Ultimately, it is your decision where, when and how much money you want to invest.
Just make sure you are making a well-informed investment decision. Most importantly, don’t put all your eggs in one basket. Try to have a diversified investment portfolio so your assets will react differently to market fluctuations. That way, if one asset falls, the others may rise, keeping your investments safe.
4. Stick to your financial goals
Setting up new financial goals is only the first half of the equation. The other half is sticking to your goals, which is the most demanding part. One way to stay on top of your financial goals is to monitor your monthly expenses. You can either maintain a small pocket diary or use a mobile app to track your daily spending. Be honest and as detailed as possible.
Break down bigger financial goals into smaller and more manageable portions. For example, if you want to repay considerable credit card debt, consider paying a little more than the minimum amount due each month while cutting back on unnecessary shopping expenses.
When it comes to investments, however, you should focus on future value rather than what you are investing now. As improving your finances is a long-term commitment, you should also think about having a budget buddy. Ask one of your family members or friends to keep an eye on your financial behavior. This person can support, discipline and motivate you throughout your financial journey.
5. Update your financial knowledge
Regardless of whether you hire someone to manage your finances or do it yourself, you must keep your financial knowledge up to date. You should not only understand the fundamentals of economics such as savings, budgeting and compound interests, but also the latest developments in investment and banking.
The internet offers a plethora of websites, news outlets and blogs related to finance and economics. You can also read the finance section of your newspaper regularly. The more you know, the better. However, make sure you are acquiring the information from reliable sources. And act only if it is accurate and relevant.
Source : TheJakartaPost | Mon, February 19, 2018 | 01:41 pm