7 Steps to Better Manage Your Personal Finances

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Closeup of businessman walking his fingers up wooden steps. Conceptual of business vision, progress and success.No matter how much you earn, no matter how disciplined you think you are with money, there’s always room for improving your personal finances. You simply cannot anticipate every major expense in your future, and once you’ve spent money, it’s gone forever. On that note, here are the seven essential steps you need to know to better manage your personal finances:

Step by Step Wealth Building Strategy

  • Recognize that you have enormous expenses: You’re probably deeper in debt than you think, even if you don’t think of it that way. You’ve got a mortgage, a retirement date to save for, and perhaps college tuition bills for your kids. When you think of yourself as having major debts, it alters how you view your spending habits.
  • Expose how much you’re really spending: Even if you’re generally happy with your income in and expenses out, you should create an itemized list of all of your spending, to identify exactly where your money is really going. This list can spur frank conversations with loved ones about spending priorities and savings goals.
  • Be cognizant your income is going to drop: Unless you intend to work until the day you die, you need to recognize your income is going to drop off precipitously when you retire. To ease that transition, you should aim to cut back now, so you can live a lifestyle that’s closer to how you’ll need to live in retirement.
  • Pre-allocate for recurring big-ticket expenses: One of the hardest aspects to manage about your finances is unevenness in spending. You might feel poor after paying for big-ticket items, like college tuition bills or Christmas gifts for all of your loved ones, and more free-wheeling during months when your bills are light. You should aim to smooth out this unevenness by pre-allocating funding for recurring big-ticket expenses.
  • Divest from Wall Street: The financial markets have never offered stability or security, and they never will. You should aim to stop blindly dumping so much of your savings into Wall Street – you’re essentially letting professional financial managers gamble with your money.
  • Reduce your tax liability: The more money you make, the more Uncle Sam will take from you in taxes. Hence, your goal should be to choose investments that offer a tax shelter for your money, such as real estate or a whole life insurance policy.
  • Keep your money moving through investments: A traditional linear investing strategy involves putting your money into one investment and then sitting back, hoping for a steady rate of return. But if you keep your money moving through investments – known as circular investing – you can leverage your money and make it work for you again and again.

Taking control of your personal finances now is the only way you can create a secure long-term future for yourself. Fortunately, all it takes is a shift in how you think about spending and income, a commitment to separate yourself from the financial volatility of Wall Street, and creative ways to keep your money moving through investments and out of Uncle Sam’s reach.

For more information about achieving long-term financial security, visit Paradigm Life’s section on Getting Ready to Retire at Any Age.

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Q: What are the seven steps to better manage personal finances effectively?

A: The seven steps to better manage personal finances include creating a budget, tracking expenses, and establishing financial goals.

Q: How does creating a budget contribute to improved financial management?

A: Creating a budget helps individuals track income and expenses, make informed spending decisions, and allocate funds toward savings and financial goals, leading to improved financial management.

Q: Why is tracking expenses an important part of personal finance management?

A: Tracking expenses allows individuals to identify spending patterns, reduce unnecessary expenditures, and gain better control over their finances, ultimately contributing to better financial management.

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