Troy Frerichs, vice president of investment services at COUNTRY Financial shares his advice for how to regain control of your finances.
Financial confidence is all about asking questions, learning, and adopting new habits.
How do you feel when you think about personal finances? Does your stomach knot up? Plenty of people would rather have a root canal than come face to face with their financial situation. At the end of the day, each of us is responsible for our own finances and – just like a root canal – avoiding them will only cause more pain. Here are six steps to make you feel more confident financially.
Kids can pull a blanket over their heads when they’re afraid of the boogeyman. As adults, we must face our fears straight on. If personal finances are your boogeyman, hiding under a blanket won’t work.
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1. Face your fears
Pour yourself a cup of coffee (or glass of wine) and sit down with your bills and a pad of paper. Write down what you earn each month. Now, jot down how much you spend. How does it look? Do you bring in enough to cover your bills, or are you short? The answer is neither good nor bad. It simply tells you where you are and informs your decisions. This quick calculation may tell you it’s time to cut unnecessary expenses or take on a side hustle. Or perhaps, you’re in better financial shape than you expected to be.
Now, flip that piece of paper over and write down your financial goals. It may look something like this:
Try not to judge yourself. We all have to start someplace, and you’re doing the hard work by figuring out where you want to go.
2. Seek answers
No one is born knowing everything there is to know about mortgages, personal loans, CDs, money market accounts, or brokerages. In fact, most folks grow into adulthood without mastering all of these topics.
Now that you have an idea of your goals, give yourself time to understand how best to achieve them. Remember, everyone learns differently. For example, you may learn best by taking an online course or through a community college. You may get more out of reading a series of easy-to-understand books on finances.
Don’t expect to absorb it all at once. It’s a process. Take time to enjoy it.
3. Build an emergency fund
Whatever your goals, one surefire way to feel more financially secure is to build an emergency fund. You’ll sleep easier at night if you have money set aside to see you through a rough patch. Even if you can only afford to put $5 into a savings account each week, the act of building a safety net will give you confidence.
4. Jettison debt
Debt can eat away at financial confidence, just as interest costs eat away at your bank balance. But it doesn’t have to. Figure out how much debt you have and decide on a debt payoff plan.
Don’t look for instant solutions. Each month you move closer to being debt-free, you’ll feel a greater sense of personal pride and achievement. Winning the lottery and paying off your debt in one fell swoop may sound wonderful. But knowing you did it yourself is something you can be proud of.
5. Regularly check your finances
Another simple way to take control is to monitor your situation. Keep an eye on your bank balances – it will help you avoid overspending and hopefully notice any fraud. You can also track your credit score and monitor your credit reports.
You’re normally eligible for a free copy of your report from each credit bureau once a year. And you can get them every week until April 2021. You know your credit history better than anyone, so you’re best placed to catch any mistakes.
6. Come up with rules
Don’t allow your finances to “happen to you.” You’re the boss, so make the hard decisions. For example, decide how much you’re allowed to spend each month on non-essentials. How much will you put into your emergency fund and how much will you invest for the future? Each financial decision should be purposeful, designed to make your life easier and more prosperous. Use the goals you set in step one as a road map.
Let’s say your friends are taking a whitewater rafting trip to Montana. You would love to join them, but you don’t have enough money in the bank – especially since your property taxes are due. As the boss of your finances, what would you say is the smart move? Even if your friends think you’re nuts for missing out, few things in life build confidence more than following your own path.
No matter how insecure you feel about your base of financial knowledge, it’s important to remember we’re all growing and learning. You’re in good company and you’ll achieve semi-pro status in no time.
The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
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