Income ManagementPersonal Finance

Improving Your Finances in 5 Simple Steps

The dream of financial freedom is a dream that is wanted by most, but achieved by few. Where most people think that it is solely about gaining wealth, it is more about having the financial knowledge that will allow a person to build and keep their wealth over the long term. If you ask yourself “Are you prepared to learn and apply five simple practices to improve your wealth?”; would you take the chance? If you are interested in pursuing this subject further, you can learn more advanced financial planning strategies through TAFE courses online.

There is a smarter way to manage your finances that will improve your quality of life. Below are five simple steps that can be used.

1. Set your financial goals and start planning a financial strategy that can improve your quality of life for the future.
Financial gurus such as Robert Kiyosaki and Noel Whittaker have offered educational books, courses and programs to help people become more savvy with their financial management. Robert Kiyosaki has simplified financial management by getting people to understand the cashflow quadrant and how to increase wealth with his award-winning book ‘Rich Dad and his clever game ‘Cashflow’.

2. Learn how to manage your cashflow
Cashflow is king! You need to maintain a positive cashflow to keep yourself out of debt. This means you need to earn more than you spend. Unfortunately, many people struggle to curb their spending habits by using all of their finances, or even worse, using credit to ‘buy now and pay later’. This mentality gets them trapped with an ongoing credit card or lending institution fees. You can leverage credit to grow wealth. However, if you leverage credit to purchase depreciating assets, your financial circumstances are on a road to tragedy.

3. Learn how to control your spending habits
The way that you spend your money can make or break you. To succeed, you need to learn how to control your spending habits to avoid overspending and putting yourself into credit. As mentioned above, you need to focus on cashflow management. If you know that you are someone who likes to purchase items on impulse, you will need to train and discipline yourself to cut costs. Plan and work to a budget that will allow you to monitor where your money is being spent. And identify what spending is necessary and what is not.

4. Learn how to invest in cash and equity assets that will grow
This is the smarter way to manage your finances. Robert Kiyosaki teaches this in his cashflow quadrant. Essentially, to build and create wealth, you need to develop or invest into income producing assets. These are cash flow positive businesses or positive growth equity assets such as property or shares.

5. Learn how to steer clear of depreciating assets
Depreciating assets can create extra expenses and burdens to your cashflow. In life, there depreciating assets that you will need to buy. But it is ideal if you can purchase those depreciating asset items that can hold their value and sustain a longer pricing shelf life. For example, purchasing branded items such as watches, phones and cars that can be resold on the market for a minor cash loss. Sometimes you may be fortunate to resell the item for break-even or even profit.

If you want to improve your financial situation, you need to develop a financial strategy. You need to define the financial goals that you want to achieve to allow you to fund the lifestyle choice that you would like to have. Ask yourself:

• What lifestyle would you like to have?
• How do you plan to afford it?
• How much do you need to fund this lifestyle?
• What ways do you can improve your financial goals?

Start by taking simple action steps such as paying yourself a savings income first. As simple as it sounds, prioritizing your income payments to yourself before your creditors are the main step you need to take to developing your initial step towards gaining wealth. Pay yourself a savings income into a banking or shares account. Don’t get into the habit of paying your creditors first and you second; otherwise you won’t be able to get yourself ahead.

Put your plan into action
Once you have defined your financial goals, strategy, and tactics, it is time to put your plan into action. Start implementing your savings plan. You may wish to pursue a Diploma of Financial Planning to improve your knowledge and subsequently, your financial strategy. This type of course will go into more detail about the different financial modeling strategies that can be applied to wealth creation. Become savvy with financial management and change your life for the better!

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