In the opening pages of Michelle Singletary’s best-selling book, 21 Days of Financial Fast, she shares the sad but impactful story of a best friend, Juanita Ann Waller, who died in an automobile accident at 54. While her friends gathered to sort her things, they were astonished to find her house and financial affairs in a spick and span state.
Juanita had a place for everything. She catalogued what was in her file cabinet. She had a notebook that detailed what was in each drawer. She left a will, life insurance and the necessary paperwork to take care of her estate. There was no single junk drawer or stuff around because she didn’t buy what she didn’t need. Michelle recalls that she and her friends wept because they hadn’t seen such a high level of organisation.
Back to you. If loved ones needed to access an item in your absence, how long would it take? Will they ever find it in the mountain of clothes and paper works you have at home? Will your case be topsy-turvy like many of us who make a few trips to the market on a budget but drive home with more than we bargained? The end is a lot of stuff. Our house becomes a chaos of clutter.
Dear reader, it’s time to put your financial house in order. If we get rid of the physical clutter and excess materialism, we will find the mental space to think and put our finances in the right order. Below are five solid steps to getting started.
- Differentiate between a Need and a Want:
This is probably the most overlooked question in personal finance. The misconception is that everyone understands the difference between a need and a want. However, we find out that people struggle to draw the line between these concepts when making impulse purchases or setting up a budget.
You’ve heard that a need is food, clothes and shelter and wants are everything else, right? But these concepts are different for many people and would change as life progresses. A need could include necessities like a mobile phone, data, a car or even a specific set of shoes. It all depends on honestly assessing what’s necessary to support a progressive life.
For others, a need might not include a car. In addition, wants are the extras that we perceive will make an impact on our lives but are not necessary for survival. When needs and wants go undefined in your financial life, you leave the door open for poor purchases. Before any purchase, ask yourself this crucial question,
Do I want it? Do I need it? Am I making an Investment for the future? How would I feel 72 hours after this purchase?
When you spend money, you should reasonably be able to get substantial returns – emotionally or materially. When you have a plan for your money, your money will plan for the future.
2. Get the right knowledge:
Financial management starts with the right information. It’s equally difficult to get your money in order if you are getting financial tips from shoddy advisers or people who aren’t well-versed in the subject. If someone is acknowledging a platform that promises 50% returns in one month on an unidentifiable investment, it tells a lot about them already. You should also demand to speak in the language you understand. Don’t be deterred by high-sounding financial lingo.
The HerVest blog is one of the many trusted financial literacy platforms. There are tons of financial programs and webinars online as well. Educational resources like books are a great place to consult.
3. Get these documents handy:
Now, this is where the real work comes in. The following are some important documents every woman should have handy and organised: Birth certificate, Marriage certificate, Divorce papers (if this applies), passports, Vehicle registration/ownership, wills, trusts, Real Estate, Tax Statements, Bank Statements, Investment Account Statements, Utility Bills, Insurance (Auto, life, car, mobile), Records of immunisations for yourself and the family, list of necessary medications.
Once you have these documents together, scan them and store them in the cloud. Have passwords documented to keep them safe. Also, make a copy of the entire file and store the documents in different envelopes. Be sure to label each and place them in a waterproof box. This way, it’s easy to access when needed. You’re also leading by example and leaving a legacy for the next generation.
4. Get on a 21-Day Fast
What I mean here is applying the same concept of a spiritual fast to your finances. Here, I challenge you to set 21 days to curb your consumerism. Stay away from luxuries, shopping or eating out. Pack your lunch to work and dedicate time to cooking. If you must eat out, do this on modest terms. Avoid using your debit card and work with a weekly budget. If you exceed the budget, train your mind to cope in a management mode. The purpose of this fast is to prepare you to prosper. To change your perspective about spending and getting your financial house in order.
5. Have a plan:
Having a plan means having a vision for your money. It means having defined goals for spending and managing your money. Money is a tool that will help you achieve the life you want, but it must be assigned tasks to work for you. Are your financial goals clearly spelt out? Are they specific, realistic and timebound? Do you have a strategy or plan of action to achieve them?
Saving and investing consistently will put you on the right track to achieving your goals and growing wealth. When embarking on your financial journey, it’s important to work with a trusted financial partner like HerVest. With HerVest, you can save and invest towards your financial goals while earning highly competitive returns on the go. HerVest is available on Google and iOS devices.