Here is a disclaimer before you begin reading; all financial advisers and generally people have different definitions of “good financial position”, so you do not have to agree with anyone. You can take bits and pieces of different opinions and create your own but please be honest with yourself.
We all should be working towards a solid base of our financial situations. We are going to call it “building a house”. You can’t build it overnight, it takes bloody years, but if you keep working towards the goal you will get there, I promise.
There are steps that you need to take to build this house. You can’t skip steps because if your house doesn’t have a solid foundation it will crumble and fall. Unfortunately, people skip steps and then get angry that they work hard, however,their house is not becoming more secure or in our case they work and get paid but have nothing to show for it.
The first step is getting the tools that will enable you to begin the construction of this house. These tools are called….here it comes…budgets. People dislike budgets because they either don’t know how to create one or they feel it will restrict them. The fact of the matter is that if you are experiencing anything negative when it comes to budgets, well then you most likely didn’t do it right. Think of it as putting on shoes that are a size too small. If you get the right shoes, you will enjoy them and most importantly you will get far. Without a budget you can’t get anywhere so skipping this step will constantly set you back, there is simply no other way around it!
Pay off your credit cards and loans, all of them! The reason I didn’t say all your debt is because a mortgage is a long-term debt and that one needs special attention and a lot more time.
Start saving accounts. You will need to decide on a savings system that will work for you. Some open multiple savings accounts, auto savings transfers etc. More is to come on this topic. We will look at different saving methods and options.
By the time we reach step 4 you are at the move-in phase of your house building. This is where you get to make design decisions in the form of your financial goals and what you would like to achieve. This step is going to be different for everyone, some may concentrate on paying off their mortgage, perhaps purchase their own place if they don’t have one yet or maybe it would be buying a second property for rental income purposes. You may also be interested in saving up enough to go on a 3-year travel trip or whatever it is that fancies you. Once you get to this stage you have most likely learned so much on the way that you no longer need further guidance and can make the right decisions.
Each step will be further dissected, so you can have a clear idea of what happens and what you need to do along the way. Stay tuned.