Worrying about money may be a sign that you are in a terrible financial situation. It is a sign that you are either not making enough money or that your needs are more than the amount you earn. Worrying about money will affect your mental performance and cause you stress. But, knowing what to do in these situations, not only makes it possible but in fact much easier to attain financial freedom so here are 5 strategies you need to employ to reach this lofty financial goal!
However, first one thing you need to understand is that many people live paycheck to paycheck every month because they don’t understand their finances. It is important to understand how much money you make every month and then make plans on how you will spend it. One of the ways to stop worrying about money is by creating an easy to follow budget.
Budgeting
The concept of a budget may not be new to you but there is a difference between knowing about their existence and actually using one. This is because not all budgets are easy to follow. Some budgets are unreasonable and difficult and almost impossible to follow. You may become frustrated if you set such budgets for yourself.
One of the reasons why a budget may be difficult to follow is because you set unrealistic allocations for your money. For example, some people will cut too much of their spending than necessary in their budget. It is necessary to cut out some things to be able to save more money but it is impossible to cut out everything you enjoy. What you should do instead is to limit the amount you spend on those things but not to eliminate them completely.
So how do you create an easy to follow budget? Creating a budget does not have to be complicated and everybody should be able to do it. If you follow these steps I’m going to go into now, you will have your easy to follow budget in no time. So let’s start.
The first thing you need to do is to determine your fixed expenses for the month. These expenses remain the same every month. They include payment on rent, health insurance, internet, and cable TV subscription and insurance. It is important to consider these costs first since they are non-negotiable before including your other needs in your budget.
Also, set aside some amount that you want to save and invest. Having savings can help you attain your financial goals. Make provision for your loan repayment in your budget too. You will see later in on how to eliminate debts. And then finally, your budget should include your needs and wants. Your needs are the basic things that you require and cannot do without while your wants are those things that you can actually do without. Being able to delineate your wants from your needs is key to saving more money and unlocking your own financial freedom. An easy way to separate the two is whether you could put off spending on that item. For instance, paying rent is non-negotiable but buying that new Apple watch is!
Tracking
Another thing that you need to do if you want to stop worrying about money is to track your spending. This is what will help you to know whether your budgeting is effective or not. Tracking your expenditures will make you know where your money is going to and how to adjust your budget if necessary. The truth is that it is difficult to track your spending and because of that, so many people don’t do it. Some will even start but they will give up on the way because they find it difficult to follow. Although it is difficult, it is not impossible so I will be showing you some methods you can use to track your expenditures effectively.
The first method is to use paper and a pen to write down everything that you buy. I know this sounds like hard work but it is effective if you buy most of the things that you need with cash. You can keep the receipts from the store with you and write them down immediately. The disadvantage of this method is obvious. People don’t like to use papers these days as before, so it may be difficult to keep track of all your expenditures. You can also forget to write out some of the things that you bought because you don’t have your pen and paper handy when you make the purchase.
However, another method you can use to keep track of your expenditure is using computer spreadsheets such as Microsoft excel. This method has an advantage over the paper and pen method because it is digital. You can easily use either your computer or your phone to record your expenses. There are also customized spreadsheet templates that make it easy for you to record your transactions. You can search for a free template online and start organizing your expenditures right away.
In addition to these methods, you can learn to track your expenditure automatically. This method has an advantage over the other methods because you don’t need to remember what you spend your money on. The apps that can help you keep track of your expenses are linked to your account so that every transaction is recorded immediately. One easy way to achieve this is to use a single card method for all your purchases. That is, you use just one credit card or debit card to buy all the things you need so that it will be easy to track.
Although, you might have heard that keeping cash and doing away with cards can help you control how you spend money but the truth is that you can still hold cash and spend recklessly. What you need is self-discipline to control how you spend money. At this point, you have the tools you need to manage your money, but let’s talk about how to make more of it.
Generating Additional Income
One of the best ways to increase your income is to start your own business. If you don’t want to keep worrying about money for life you have to understand that your small business must not remain a small business but it must grow. No matter what type of business you operate there is always a way to scale up your income. Every big business today started from somewhere before they started expanding and scaling up.
Your goal should be how to increase your revenue without increasing the production cost. That is, scaling your business is another way of saying that you have increased your production and profit in a cost-effective manner. A company can say that it has scaled up its business when its revenue increase while its operating cost remains low. Scaling up is when you don’t need additional input to increase the output of your business.
The difference between growth and scaling up a business is that growth involves additional input while scaling up does not. For example, if you acquire a new customer and need to spend the same amount of time and resources that you spend on other customers, then it is growth. That is, each customer will cost you additional resources to deliver their need. But scaling up is when you can use the existing resources to meet the needs of new customers.
The first step to scaling up is to set a goal to increase your income. Determine how much you want to expand and create action plans to achieve the goals. Your strategy may not be the same as another business so make sure you know what will work for you. Your strategy should make you earn more money while you spend less. Create a team of people who have what it takes to help you achieve your goals and whenever possible, outsource your work to people outside your team instead of hiring new people at extra cost. Also, invest in technology to automate most of your activities and thereby reduce cost. For example, it will cost you the same amount of money to send emails to either 10 people or 100 people. Automate any process that is possible so that you can create a system that can work either you are around or not.
However, if starting a business isn’t for you, don’t worry you can scale up your income too. If you have a job, see if you can go from salary to part salary part commission so that you can join the profit stream and see your greater output result in greater compensation. Alternatively, you can create a side hustle that can complement your 9 to 5 income.
Managing Debt
Another reason why people worry about money is debt. People become anxious when they think about their debts and how they are going to repay them. Worrying about money because of debt can affect your mental health and trigger stress which can lead to low productivity. Worrying about money won’t solve the problem so the right thing for you to do is to create a plan to eliminate all your debts.
The first thing you need to do is to create an easy to follow budget which I mentioned earlier. This will help you identify how and where you are spending your money and if you are also spending more than you earn. The work of the budget is to help you spend within your means and avoid further debts.
Now, add all the debts that you owe so that you can create a debt payment plan. A debt payment plan is an efficient way of paying your debts in the shortest possible term. You also have to understand that not all types of debts are the same. Some debts are good debts while some are bad debts. Good debts are in the form of loan that helps you make more money while bad debts are the ones you used to buy things that do not add any value to you. Some debts also have a higher interest rate while others have a lower interest rate. Make sure you note the minimum payment required for every debt that you owe so that you can easily pay them off at the end of each month.
Next, you have to start paying your debt. It is helpful to start paying off debts with higher interest rate first to avoid paying more money at the end of the day. Make sure that every month you pay at least the minimum payment required for each debt and continue to increase the amount that you pay until you eliminate all debts.
Planning For Retirement
One of the biggest monetary concerns people have is whether they will ever be able to afford to retire. Sadly, only a few people prepare themselves for retirement and that’s why most people get worried when they think of it. Many people don’t have any amount saved up for retirement and the few who have retirement savings do not have enough. In fact, numerous individuals have no idea where to start when it comes to retirement saving. Keep watching and you will learn everything that you need to start right now even if you do not have any money in your retirement account.
The best way to save enough money for retirement and never worry about money is to start saving early. In fact, you can start saving for retirement from your first paycheck. The advantage of starting to save early is that you will amass more money and will cut down your years until retirement. You can start contributing towards your retirement by opening a 401k retirement account from your employer which is funded through pre-taxed payroll deductions. If your employer is an educational institution or a non-profit organization, you can get a 403b account. Another way to start saving for retirement is by getting an Individual Retirement Account — IRA. By setting up any of these accounts and investing consistently, you will be sure to erase this financial worry from your mind!