How to Repair Your Finances?
Whenever I have a financial tantrum, I like asking myself this question: How to repair my finances?
Remember your finances include the following elements:
Income
Expenses
Assets
Liabilities
Cashflow
When you understand those key financial elements well, you become financially intelligent. It is not just about earning an income but also managing the ratio of income and expenses and assets and liabilities.
The sad thing here is this piece of information is not taught well in schools and colleges. Students graduate with one idea in mind which is: Get a well paying job and start earning an income.
When it comes to assets, majority think that when you own a house of your own, that is an asset. However asset means an entity that generates money into your income. if you own a house, live in it and pay a monthly mortgage for it, it is a liability and not as asset.
So back to the question again. How a person can repair his/her finances?
Firstly, understand your monthly financial statement. Where your money goes? What your transaction looks like? How much you normally pay for your daily usual expenses like utility bills, grocery, petrol, gym membership, kids’ entertainment and other expenses you may think of?
Second, create ways or ideas where you think can contribute positively towards your monthly cashflow and income. For example, instead of having meals in expensive restaurants, swap it with cheaper ones. Instead of shopping for clothes monthly, reduce it to once every three months. Check your monthly online subscription. What subscriptions you don’t use anymore and can cancel it. Creating such ideas can repair your finances and reduce the mental pressure and burden.
Third, look for other sources of income instead of just one. Besides your monthly salary, what other avenues that can generate a side income for you? Practical ideas could be a part time job, a side business, a hobby that can be converted into a business or simply minimizing your life-style to make it affordable and manageable.
Thinking and reflecting this way open doors to tap into our inner financial genius. Whatever you do today and wherever you are at in your financial life, remember that your money earning and spending habits are your personal choices. You have got the personal and individual freedom to shape and control them in the way that serve you best today.