Improving your financial situation can sometimes be as simple as assessing your current habits and financial circumstances while making strategic pivots where necessary. Personal finance is the financial management which an individual or a family unit performs to budget, save, and spend monetary resources over time. This takes into account budgeting, banking, insurance, investments, tax planning and more. Ensuring that you are financially literate and make the personal investment in optimizing your finances is critical for success.
Even if you find yourself in the most difficult financial situation, these next few tips will help you dig your way out. If you are already financially sound, implementing these strategies will only further progress your financial success!
Track Your Finances
As tedious as it sounds, every single aspect of your financial life should be tracked. From the coffee you purchased on Monday morning, to the rental property you bought as an investment asset. Keeping track of the purchase date, amount, type, etc… will allow you to keep tabs on your financial history, making monthly reviews a breeze.
There are several softwares to help you keep track of your spending habits, ranging from tools within your banking app, to money-tracking apps on the app store. Additionally, if you’re a small business owner, you have the option of partnering with a professional bookkeeper to help ensure that your finances stay on track.
Create a realistic budget
Budgeting is arguably the most important facet of your financial program. Creating a budget that encompasses all your expenses on a monthly basis is essential for visibility and accountability. Use your monthly spending habits (track for one month straight if you have not yet) as well as your take home pay to create the framework.
Place emphasis on the word realistic however, as it is imperative that you create a budget that you will stick to. For example, don’t create a budget that doesn’t include eating out if you are currently ordering takeout 3-4 times a week. The budget should truly show you how much you are spending, and if you do not like what you see, all the more reason for change!
Conduct Tax Planning Sessions
Whether you’re a business owner, contractor, or a W2-Employee, proper tax planning can have a significant impact on your bottom line. In the long term, the difference between the most successful business, and a failed one, can be deduced to poor tax planning and execution.
We all know taxes can eat into your annual income, and everyone wants to pay less of them. “How can I pay fewer taxes” is the number one question you will hear as an accountant, and the answer is always the same. A proper plan.
Tax planning is a legitimate way of reducing your tax liability over the duration of any given fiscal year. It helps you utilize tax exemptions, deductions, and benefits offered by your government to those who take advantage.
In simplest terms, it is the analysis of your financial situation and the pinpointing of money-saving opportunities, from the lens of a tax expert.
Cut back on recurring expenses and subscriptions
In 2021, the monthly recurring model has become so commonplace that many of us have subscriptions that we may no longer use, need or have forgotten about. Needless to say, you could be spending hundreds or even thousands of dollars a year on unnecessary products and services that you may be able to cut out.
Doing so will allow you to relocate that budget to aspects of your life and business that count. If you’re an iphone user, take a look at your “subscriptions” in your phone settings and assess your current spend. Additionally, there are several subscription tracking apps available on both Iphone and Android for your convenience.
Create an emergency fund
One of the most common things you will hear financial advisors preach is “set up your emergency fund” , and that is for good reason. An emergency fund is a stash of funds that you have set aside for any unexpected events life may throw at you. This typically comprises 3-6 months of expenses. Unexpected financial emergencies can be stressful, and costly. Ensuring that you have the funds available to deal with these situations can save you time and headache. Below are some of the top emergencies people face:
- Emergency Car Repair
- Unexpected Medical Emergencies
- Job Loss
- Unplanned Travel Expenses
- Home Damage
Simply making it a goal to put away X dollars per month in order to reach that 6 month goal can be a lifesaver. This should be one of the first things you plan out in your budget.
All in all, you should be progressing every day to improve your financial situation. The first step is to educate yourself and build a solid foundation. Simply implementing a few of the suggestions above will set you on the right path to achieving your financial goals.
If you’re a business owner and have not sat down and created a tax plan yet, book a call with one of our experts, and we’d be happy to help you!