Trying to find ways to improve your financial situation? These five simple tips will straighten you out in no time.
Before we begin please note that this post is not about how to make money or making your dreams come true. If that's what you are looking for you can read about it here.
In fact, this post is about how to spend wisely and improve your financial situation so that you don't get into unwanted debt and pressure.
Let's get straight to the point and find out how you can take control of your finances using this five simple strategies.
Step 1. Pay more attention to what works for you.
All the best financial advisors know that psychology and money are irrevocably interlinked.
Unless your approach to money makes sense to YOU, and sounds good to YOU, you’re never going to be able to improve your financial situation or change the way you deal with dollars.
In other words, it’s no use if you have a great-sounding budget on paper if it doesn’t work out in real life.
For example, when I was in college, my parents paid for me to consult with a budget advisor to help keep my head above water.
The advisor mapped out a great-sounding budget for me except that, once I actually tried to apply it to real life, it just plain didn’t work.
And here’s why: my life in college revolved mainly around partying and meeting people (initially before I got into this business).
Sure, I hit the books during the week, but during the weekends, my biggest pleasure was getting ‘out and about’: going to parties, going to dinners, meeting people, and generally ‘schmoozing’.
On the cheap, of course – bargain basement Stoli and BYO diners instead of premium liquor and 5-star restaurants – but still, some cash had to change hands for me to have fun and stay sane.
Those financial expenditures weren’t bugging me, because my social life was a personal priority; but to the advisor, anything except groceries and thrift-store clothing was pretty much a no-no.
My Financial Advisor Mapped a Plan To Improve My Financial Situation.
So, he mapped out a plan that involved me spending all my available money from my part time job and partial scholarship on either:
a) paying back my student loan,
b) saving, or
c) buying books and school supplies.
Nothing about what mattered to ME; just the stuff that I ‘should’ be doing.
Needless to say, I ended up ripping that budget into little shreds about 3 days into it, once it became clear that, in order to ‘succeed with money’ by this person’s standards, I was going to have to turn into someone who just wasn’t me.
My youthful self was instinctively acting on a truth that’s since crystallized over the years: it’s useless to give out straightforward, black-and-white, logical commonsense ‘rules’ about money unless that advice relates somehow to the way that they think and feel.
To change your financial situation, your plan needs to encompass what’s important to you.
If you’re a die-hard foodie, for instance, a budget that requires you to skimp on meals and groceries in order to tackle debt isn’t going to work (and deep down, you know it.)
I’m not saying you should be able to have everything you want and need and the hell with your debts, savings goals, or retirement plan; I’m just saying that you need to pay attention to what matters to you, and strike a balance between your goals and your day-to-day happiness, because otherwise?
It’s never going to work.
So rule number one: stop listening to what everyone else thinks you should do, and start paying more attention to your own gut instincts.
Step 2 - Take Control of Your Spending Habits To Manage Your Finances.
Disposable income is more important than you think it is. Another way of saying this might be: possessions suck, discretionary cash rules.
A third way of saying it might be: simplicity is everything. Most people don’t realize this.
They spend a lot of their money on ‘things’ – jeans, boots, cars, holidays, sports equipment, houses – and even though they end up with a life that ‘looks’ rich from the outside, that same life actually feels pretty damn poor to live in on a day to day basis.
Why? Because, even with all the boots and jeans and houses in the world, life just ain’t much fun if, as soon as pay-day comes around, each pay-check is planned and pinned and accounted for ahead of time right up to the next pay-day.
Consider valuing disposable income over ‘things’. You’ll find that, even though you may end up acquiring fewer possessions, the ones you do have you’ll truly value (since you’ll have thought harder about their purchase and chosen them with more care.)
They’ll give you more pleasure, will probably be better quality than the type of junk most people buy on impulse, and thus will be better value for money.
Along with more disposable income, you’ll also have more time at your disposal, since you’ll need less of it to work to pay for and maintain the possessions you have.
A final surprise bonus: you’ll get more pleasure out of everything in your life – relationships, families, pets, fitness, sleep, nights in, nights out - because you’ll be more relaxed, feeling good and stress-free due to the simplicity of your spending habits.
When Money is Tight, Your Time is Tight.
Here’s the deal: if your money sucks, then everything else sucks too. When money is tight, your time is tight. You feel (and act) constrained, frustrated, scared, stressed, and anxious.
Your relationships become fraught. Something as simple as waiting in line to get a takeout coffee becomes an exercise in toe-tapping, tightly-wound impatience.
This is the way life feels when you overspend and buy yourself too much ‘stuff’, without leaving yourself enough disposable income to feel rich as well as look it from the outside.
Too many possessions and too much ‘purchasing’ for your own income equals complexity. And complexity equals frustration. The bottom line: complexity in your finances equals stress and discomfort for you.
It’s easy to get sucked into the consumerist concept that more possessions, more vacations, more clothes, more cosmetics, more parties, more cars, more ‘glittering accoutrements’, equals pleasure but I have an astounding theory for you:
Complexity is actually painful. ‘More of everything’ is only good when you have the cash-flow (and the savings) to maintain a comfortable lifestyle, and to maintain those possessions that you’re buying, without pinching, scrimping, and worrying about how you’re going to manage.
New watch, new shoe are no good if their purchase means you can no longer afford conveniences like nice lunches, money for taxi fare, and the shoe polish to take good care of them once you’ve bought them.
A sexy watch looks very pretty when it’s on your wrist, but if buying it is not improving your financial situation and you can’t afford to go out anywhere worth wearing it for the next six months, what’s the point?
And is a vacation really a fun, relaxing experience when you know that, what with the interest rates you’re paying, a $5,000 vacation actually ends up costing $20,000 by the time you’ve paid it off? I think not.
In fact, here’s what I now believe to be true: having enough disposable income to live comfortably is more important than most possessions, most vacations, and most ‘things’.
In other words, simplicity is best. Simplicity is fun. It’s relaxing. It allows you to feel content and safe now, because you know that there’s no debt specter looming up tomorrow, next week, or next year.
When you take care of your financial goals today, tomorrow will follow suit – which means you get to relax all the more.
This isn’t about simply ‘making do’. It’s about clearing the financial clutter out of the way in order to make way for true wealth and happiness to appear unhindered.
A basic principle of the ancient Chinese art of feng shui is that amazing stuff can happen when you clear the clutter out of your home environment –and the same principle also applies to your spending habits, credit habits, and debt involvement.
My next tip will explain how to simplify your money situation WITHOUT streamlining down to the financial bone, ‘grinning and bearing it’, or living off noodles and adzuki beans until you get out of white-knuckle territory.
(In fact, with this way of living, you’ll actually have MORE money than ever for the incidental day-to-day pleasures that make solvency so much fun.)
Step 3. Become a more discerning shopper.
This doesn’t mean becoming boring, grim, or fixated on one goal and never having any money available to actually buy anything because you want to have it all free for last-minute lunches, spray tans, golf gloves, whatever.
When you’re a discerning shopper, you can still buy whatever you want, and you can still make significant purchases (a house, a car, a holiday) whenever you want.
The difference is simply that, this time, you won’t be operating under any illusions about how having more ‘things’ will automatically make you feel, and seem, richer and more competent and at-ease.
You’ll be spending money on them because you really, truly want them, instead of simply operating under the automatic misapprehension that living = consuming.
Focus on spending your money only on what gives you real happiness.
Practically speaking, this means that impulse shopping is probably out. You’ll grow to know when something ‘speaks’ to you - when it will truly improve your home or life - but this will probably take a little time to get a handle on.
So until your natural money-spending instincts are a little better honed, take the pressure off by waiting at least 24 hours on all major purchases.
Ditto ‘pastime shopping’ (you know: buying stuff because you’re bored, or because shopping is something to ‘do’.) Mall-cruising to kill time has to go the way of the blue suede shoe.
If solvency and financial comfort is your eventual goal, it’s time to find other stuff to fill your time: you’ll be a more fulfilled, not to mention richer, person.
Step 4. The only money you spend is money that’s already yours.
This means that from now on, you’ll be paying cash – or its equal – for everything. In other words, cheques, debit cards, coins, and bank notes will constitute 100% of your spending ‘diet’ from now on.
This is probably one of the single biggest steps that you can take towards improving your financial situation and ensuring less stress today, and a safe and happy tomorrow.
When you spend money that you’ve already earned, not only is it easier to figure out what’s really important to you (the pizza or the new book?
The groceries or a night out?), which automatically pares down unnecessary spending and grants fast-track simplicity to your spending habits but it becomes a lot easier to get out of hock, too, which is (somewhat ironically) one of the major causes of unnecessary spending in the first place.
Yes, I said major causes of unnecessary spending - not the other way round.
Studies show that when people are feeling stressed out about their money, the one thing that most do to calm themselves down is to get deeper into denial and go shopping.
When you make the conscious decision to stop getting further into debt by only spending money that you’ve already earned, everything becomes simpler.
Even though it can be a challenge at first (especially if you’re used to flinging credit around no matter the consequences), the feeling of serenity and self-respect that comes from a cash economy is unparalleled and it has far-flung effects on all aspects of your life.
Step 5: Use the 50-30-20 rule to live guilt- and debt-free.
Here’s the way it works: 50% of your money (after tax) goes on what you need. 30% of it goes on what you want. And 20% of it goes on savings (which includes debt reduction, emergency fund, and all savings accounts.)
This is an excellent, basic, easy spending plan that enables you to live a good life right now and take control of your financial situation (as opposed to ‘someday when the debt’s paid off’) and will help you to take care of necessities, save for the future, tackle debt in a timely and reasonable manner, and still have fun.
The point here is that you figure out what works best for you. These percentages provide a good starting place to figure that out.
The 50-30-20 rule is basically a jump-off point for you to safely, sanely enjoy yourself while getting used to the idea that:
a) you can have what you want, but you can’t necessarily have everything as soon as you want it; and
b) it is possible to enjoy life and pay off debt at the same time.
So there you have it: a sound basic game-plan for ditching the complexity and embracing simplicity. Once your financial habits are simplified and streamlined, an amazing thing happens: money shifts out of your everyday consciousness and assumes more of a backseat role.
How Improving Your Financial Situation Give Your Peace of Mind?
Your attention shifts from poverty consciousness to wealth consciousness - otherwise known as an awareness of the abundance of life, energy, and money in particular.
Life instantly becomes more relaxed. You feel able to appreciate your frugal, safe, and comfortable lifestyle and spending habits instead of feeling guiltily compelled to fling money about like a man with 10 arms, with the ‘debt guillotine’ dangling over your head all the while.
It becomes possible to appreciate sanity, and the feeling of ‘having enough’, while actually taking care of yourself, rationally, with respect, at the same time.
You start to appreciate these basic self-kindnesses, and to appreciate what it means to live truly within your means – and to have that be enough.
(Truth be told, it’ll feel like more than enough.) And of course, since what you appreciate appreciates, it becomes easier and easier - and more and more rewarding - to treat yourself well, avoid debt, and live happily and safely the more you do it.
That's it. I hope you loved reading this in-depth guide on 5 ways to improve your financial situation if you really enjoyed reading please do not forget to share and comment.