We all worry about different things, but in times of uncertainty like the current COVID-19 crisis, many of us worry about our Finances most of all. Some of us may be worrying about our jobs, our salary or whether we can pay our bills. So I’d like to share 5 steps to help you improve your Finances and your relationship with money.
- Determine your Financial Mindset
What words come to mind when you think about money? Does thinking about money make you feel stressed or good? Many of us typically have negative thoughts when it comes to money, such as “I never have enough”, “I can’t seem to save anything”, or “Its complicated”. The way we think about money, our Financial mindset, affects our physiology and behavior. Financial stress can cause your whole cardiovascular system to shut down – in other words cause a heart attack. Financial stress is the number one cause of divorce. Turning your Financial mindset into a more positive outlook can have a huge impact.
How could you make your outlook towards money more positive? Think about what you are grateful for at the moment; “I’m thankful for my paycheck”, “I have enough food on the table”, “We have a roof over our heads”, “I control what I spend my money on”. Having a more positive mindset impacts your behavior. We all have worries or concerns, but try to get specific about them. What has changed that is causing you concern? What’s actually changed? Try to go from “It’s a disaster” to “This is what I am worried about and this is what I can do about it”. Try to go this process together – with your partner.
- Go through your expenses
This is relatively easy to do but is a critical step if you want to take control of your Finances. Create a list of your income and your outgoings. Understand your costs and where you are spending your money. It helps to break it into groups such as Utility bills, House, Transport, Memberships, Hobbies, Holidays, etc. Once you’ve done that try to identify things you can remove or minimize. In difficult times its important to identify what you can do without. Remember you’re not giving these things up forever, just for a while. Again, do this together with your partner.
- Prioritise your Emergency Fund
There’s often confusion about what your Emergency Fund or cash reserve is so let’s clarify that first. This is cash you hold in reserve for a rainy day, preferably in a separate account, for the big stuff that occasionally happens to us in life. This is big stuff like redundancy, a serious medical issue, a family wedding or the uncertainty brought about by COVID-19. All of which can have a serious financial impact. It is not designed to cover miscellaneous monthly expenses like a car breakdown or a plumbing leak. These things happen all the time and are part of your regular monthly outgoings. If you don’t have an Emergency Fund, set one up now and put a little aside into it each month. Keep it separate from your other accounts otherwise the temptation will be to use it. Put money here before you spend on luxuries and non-essentials.
- Saving & Planning Ahead
Once you understand your expenses (Step 2), the next important step is to plan ahead. In uncertain times like the current COVID crisis, identify the things you are no longer spending money on, like petrol, Salik charges, Cinema, dining out, travel, etc and divert these funds into longer term savings. Organisation is the key here. Start with a simple 3 month plan. What money can I divert into savings or investments? Then move to a 6, 9 or 12 month plan. Set yourself some goals and track your progress. Prioritise your savings and watch them grow.
- Remember that being Wealthy is not only about Money
There are multiple aspects to being truly wealthy; Spiritual, Emotional, Physical, Relationships, Social and of course Financial. The last one almost always gets the most attention as its easy to measure and in our materialistic society often equated to happiness. That’s not the case. One way to reset your mindset is to remind yourself of the things you are grateful for – your health, family, relationships, etc. Its not all about money.
5 steps you can take now to take back control of your own finances. Don’t wait until you’re ready to take action, take action to make sure you are ready.