January 28, 2023

Making the Right Financial Decisions Can Change Your Life

By DENNIS BLACK on Jan 4, 2023

Given that we are going through a difficult period in many ways, it is never too late to start making the best decisions for yourself and those close to you, so you can take into account your financial life because this aspect of life influences you quite a lot.

No matter where you are, you can always start making some savings and even set some financial goals for this year.

You have to learn to control your finances, but what you need to keep in mind is to make a plan and follow it, and in this way, it will not be difficult for you to get closer to the financial goals you want.

What Can You Do to Achieve Your Goals?

Make a Monthly Budget

This is the first piece of advice you need to follow when you want to put your finances in order. A budget, in addition to helping you save, will be a real help in seeing which direction your money is going and so you will know which area of ​​your budget is the one that consumes the most money.

A budget helps you do better with finances, but the best reason to have a budget is that you will be able to save as much as you want.

Check Your Expenses Carefully

You need to always know where your money is going and how you can make some changes, so you don't have to spend that much money. In order to check your expenses, you can write down somewhere where your money is going.

You can put this information in a notebook, or you can write it down in an application.

Physical writing is sometimes more efficient because this way you will become more aware of what you are spending.

A smartphone app like Revolut could be a solution to keep track of expenses. This way, you will easily see where your money is going, and you will be able to make the best decisions about it.

Respect Your Budget

Although making a budget is the easiest part, meeting that budget creates the most headaches. In order to keep your budget under control, you have to be very careful about your expenses and think about whether a certain expense is worth it or not.

This is hard to follow and although it may seem easy to meet your budget, sometimes you can't do that, with many people clicking sooner or later, spending their savings.

On the other hand, if you are disciplined, you allocate part of your budget to enjoy things like vacations or going out, then it will be easier for you to keep things under control.

You have to think about the winning formula for yourself and stick to it. You can make a 50/30/20 budget or any other type of budget that suits your situation better.

Payment of Debts

If you have debts, then their payment must take precedence.

Try to get rid of debts because this way you will release a significant part of your budget. Debts are paid on time, and it depends a lot on your budget. Depending on your budget, you can set a percentage that will lead to the payment of debts as soon as possible.

With a debt payment plan, you will be able to pay off these debts much faster and thus you will even be able to save some time.

Don't Get into Extra Debt

If you are unable to meet your debts, then it is a bad idea to incur additional debt. Ideally, you should get rid of a debt before you start incurring other debts. But know that not all debts are bad. You should know very well the process of good debts and bad debts and use especially the good ones.

In short, good debts are the ones you will invest in assets that will make you money in the future. Here I leave it to you to inform yourself about this aspect.

Emergency Fund

It is important to have an emergency fund, the size of this fund varying according to your needs. To make such a fund, you must first calculate how much you spend in a month.

Once you know this, you can multiply this amount by 6 or 12 and thus you get an idea of ​​how much you will need to be able to cover the expenses.

It is generally recommended to have a 6-month emergency fund * for basic expenses, and to increase it along the way. However, it is best to be guided by how much you spend in a month and depending on this to determine how big your emergency fund will be.

Think About Your Career

Investing in what you do every day is something you can consider. If you like what you do, then you should always think of ways to become better in your field.

To do this, you need to invest in courses / books and education first. All these things cost, but as you accumulate this information you can become better and better, and in the long run all this information will help you a lot.

At the same time, if you feel that you are not attracted to your current career, then now is the time to think about it more and see what alternatives you have. Changing your career may even be a good thing for you, and if you feel it's time to take that step, then you don't have to procrastinate.

Reduce the Expenses You Have as Much as Possible

Regardless of your financial situation, spending cuts are something you need to keep in mind.

By reducing your expenses where you can, you will be able to stay with more money, and more money in your pocket will also mean that you will be able to achieve your long-term goals.

You can choose a category from your budget in which to look for ways to save money.

If you can reduce your expenses a little more, but at the same time look for ways to earn more money, then in the long run, this will improve your financial life.

Automate Your Budget

Budget automation is something you can do very easily.

For example, you can make certain settings in the banking application so that payments are made automatically month by month. This way, you will no longer have to deal with late payments and additional fees.

This is more of a tip for you to make it easier and more practical.

As Few Objectives as Possible Must Be Set

A simple goal helps you a lot. You don't have to complicate yourself too much with your goal.

Setting a single annual goal and meeting that goal is something you need to keep in mind.

A short-term goal would be:

  • This year I want to have investments of 1000 euros,
  • This year I want to buy another apartment to rent,
  • This year I want to eliminate 50% of the current debts,
  • This year I want to increase my active income by 20%.

And so on. These are just a few short-term goals. Ideally, you should start with a few long-term goals such as:

  • In 20 years, I would like to have a passive income equal to the active income,
  • In 20 years, I would like a passive income of 2000 euros,
  • To retire sooner at the age of 55,
  • In 10 years, I will have 4 properties for rent.

And the list goes on.

Take Confidential Data into Account

Beware of financial scams that take place daily and try to protect your personal and financial data as well as possible. There are many strategies to do this, and banking applications allow you to secure your accounts very well.

Use unique passwords for your accounts and be careful where you keep those passwords. If you have lost your card, freeze that card immediately from the application and report the card as lost.

This is more of a piece of advice that I recommend as a precaution.

Start Investments

If we have the foundation in terms of managing our own finances, then we can also think about investments.

The priority for you is to establish your risk profile, to find out which investments are right for you, to know what types of investments are and their performance and to make a plan.

Beginner or advanced, we each need plans - even if they change over time.

Start investing from a clear goal and try to reach it.