To master your money you don’t need expert investment strategies or a finance degree. It is necessary to have short-term and long-term planning and the discipline to stick to your plans. Here are 5 tips to understand money better.
1. Find your own way to learn personal finances
As any other thing you want to be able to handle, understanding money, requires knowledge. The first thing you need to do is read a lot about financial concepts. This may sound difficult, but luckily there is an enormous amount of books, podcasts or blogs that will help you learn how to improve and matain your financial health. Whether you are a single millenial woman, a working mom or a college student, there is a book or blog for you. You only need to find the right one and get started.
2. Check your credit score and improve it
To understand your overall financial health you need to check your credit score. Lenders, for example, will check this to know what your credit risk is, and whether you are credit worthy or not. A poor credit score can prevent you from borrowing money from traditional lenders or lead to higher interest rates. This is why it is important to check and be sure there is no innacurate information that can affect you negatively, find out if you have been a victim of identity theft, or find ways to improve your score if necessary.
3-Know Your Net Worth
Most people only pay attention to the money coming in and out of their bank every month. But that’s a really short-sighted way to look at your finances. Knowing your net worth is very important. To know this you must calculate: assets (what you own) – liabilities (what you owe)
• Any other things of value you own
• Student loan debt
• Credit card debt
• Any other money you owe
Start to pay attention to this as early as possible and always be working to increase your net worth.
4-Set Financial Goals
It’s important to set long-term and short-term financial goals.This helps you to determine your priorities and what you should be doing with your money every month. Analyzing your priorities and understanding how you need to adminístrate your money to accomplish these goals is the first step towards creating your budget. Different goals may include a new home, a new car o putting money towards an emergency fund, for example.
5-Check Your Finances Regularly
Checking your finances regularly will help you understand your financial habits. Being aware of where your money goes to every month can help you see how much money you spend without realizing it. There may be months where you go overbudget, but it should be a concious decisión and you should be able to make up for it the next month when this happens.