Introduction
Finances can be scary, we get it. So thats why today our Blog posts main focus is giving tips to potential help with your Financial Stress while also giving you ways to potentially build that Financial Resiliance we hope to have during a crisis. Dive into our first topic where I explain my personal technique for Planning and Creating My Budget.
Create a Budget
When beginning with the challenges of Managing your Financial Stress the first thing you should do is create a proper budget. Budgeting your money is important as it allows you to direct your flow on income as it comes or prior to arrival. This opens the opportunity for you to be able to stay ahead on your bills and to keep on track with your goals.
When it comes to the structure of the budget though there are many different routes you can take for how to create your own personalized budget. From my higher studies in Finance and Accounting I have comprised a basic layout of how to create your own personal budget from scratch. I personally use this technique for my budget and so far it has worked amazingly well for my personal saving goals.
To start I will make a list of my personal expenses and the dates in which they are due. From there I will prioritize the expenses that are close to expiration and I will then calculate by dividing the amount of money needed for said expense and the days till due. I will then find out how much I need to save each week based off the initial number. Once I know how much I need to save for each expense weekly I will then add them together in order to know just how much I need to take out of my paycheck for that week. Once I receive my pay I will then do one of two things depending on how I receive said payment.
If I have received cash then I will analyze the quantity of cash in hand. I will then proceed to make piles with the proper quantity of cash in each. This ensures that you are already prioritizing what is needed for expenses for the week. If it is direct deposit or a check then I will wait until it has fully entered my bank account in full before I even use the said amount that was entered into the account.
Once you finish with this process you will come to find that you will have an amount left over. When you begin saving that amount will be very small and as time goes on it will grow, but for the time being here is my strategy for what to do from here on out.
To begin you must decide how you wish to use your excess money. For most that consists of just the typical lifestyle of having fun and enjoying oneself in their own guilty pleasures. My advice to you is something along the line of "Don't Waist Your Youth, but Don't Ruin Your Future".
First step is to divide the remaining amount by 2. This will split your "Free Money" into two piles. One will be designated for Saving & Investing. The other pile for now will be labeled as "Other" for now. Multiply the amount in the savings pile by 0.75, this will give you 3/4 of what is in that pile. That is for your savings account. The other remaining 1/4 will go into any investment of your choosing. Stocks, Bonds, ETFs, Land, Property, Gold, Oil, Watches, Etc. doesn't matter what it is just as long as over time it gives you a return from your initial purchase.
The final step would be figuring out what to do with the "Other" pile. My personal recommendation is to take $25 out for yourself for spending for the week on guilty pleasures and the rest if you haven't already then make an Emergency Fund.
Emergency Fund
What is an Emergency Fund and how does it really help me?
Imagine its a warm sunny day, your out in the city driving going to go for a little trip with your friends. You notice that the roads are kept very well as there are potholes almost everywhere you look. You see a big one coming up but someone says something to you so you get distracted an in what feels like half a second passing your tire hits the pothole and you hear a loud "BANG" and notice that your car is now rocking back n forth. You pull over to check out what had happened and notice you have a flat.
Now some may be saying "I have a flat" or maybe you have AAA which is fine for everyday but for this scenario you would be screwed if you didn't have extra cash saved on hand on top of what you need for the typical month to month stuff. This is where the Emergency Fund would come into play.
My personal advice for this is to not just have a One Month Emergency Fund but a Three Month Emergency Fund. I say this because a three month buffer should be more than enough time for you to asses your options that are IN front of you at the time while also giving you plenty of time to get back up on your feet. Which trust me coming from someone who has had to get back on their feet with nothing to stand on it is not easy so if you have the option to build that up I would highly suggest that you do this so that way you don't have to go through that same struggle that I did.
For those who are in so much debt that they don't think they would be able to even make an Emergency Fund here is my advice for how you should go about your own debt management based off how I personally handle my own.
Debt Management
To begin I would say that you should organize your debt from the highest interest to the lowest interest percentage. The number one thing you should always do with debt is prioritize the highest interest first. This compounding over time will in turn make you loose more money then a lower interest percentage debt account. This one step is so life changing that that alone could potentially relieve all financial stresses form your debt accounts. My advice is to start throwing money from your budgeting from expenses weekly and start giving it to the account with the highest interest while still attempting to pay off the other accounts but still making sure you can pay the minimum that is due for the time period. There are cases where even this wouldn't work though with the allotted time period and income of said person. If you are in this position then my best advice for you would be to consider options such as consolidation or reconstruction for your credit. In EXTREME cases start looking into filing for bankruptcy.
Seek Financial Education
A good way to be able to stay ahead on your own finances as well is by learning and understanding Financial Topics and Concepts such as Finance, Accounting, The Stock Market, etc. These are broad topics with many sub-genres I know but that being said there are certain things that are in each of these genres that will help you in your everyday life.
For those who wish to just get basic information come and check back on these blog posts as we will be getting more in-depth with Financial topics as time goes on.
For those who just want to start learning before they go for higher education to get an upper hand my advice to you would be learning these topics.
- Business, Accounting, and Finance Ethics
- Stock Charts
- Intermarket Trading and Analysis
- Journaling (ACCOUNTING)
- T-Charts
- Trial Balance
- Income Statement
- Statement of Retained Earnings
- Balance Sheet
- Statement of Cash Flows
- How to Categorize Assets, Expenses, Liabilities, Revenues, Owners Equity
- Learn what a Stock, Bond, Mutual Fund, Index Fund, Options Contract is
- Learn how Credit and Loans work
Those topics alone will give you enough of a background to be able to walk into your first class confidently as long as you properly self study these topics. Do not however walk in as i you know everything. You will get a good idea with these topics for what you will have to do but you don't know everything. When you walk into any new situation NEVER walk into it as if you know everything. Humble yourself and feel pride for knowing some stuff that will help you understand the more complex topics in said class easier than if you did not.
Review Insurance Coverage
Another piece of advice I have for those who have access to this is to check your Insurance Coverage and see what benefits it offers you. Insurance has many different options for the benefactors. Some may even offer a cash return for certain expenses or situations. For those who are needing a Emergency Fund but cannot because of their debt this may be an option for you to have a floaty while you are drowning. Now a days there are Insurance Options at a variety of different prices with a range of benefits, look around at different companies if you have the option to and choose the best one. If you are only able to get the one your job offers you than go through whatever pamphlet or email that consists of your plan with benefits and FIND YOUR BENEFITS!!! Who knows you might have free money sitting there waiting for you.
For those who don't have Insurance start looking into it. There are many kinds of Insurance but the main ones are Health, Life, Residential (House or Car or Both). I cannot give advise on what kind of plan to get as that is a person to person basis so this is where I will leave it to you.
Set Realistic Goals
When it comes to how your goals should be structured I would advise in only realistic goals if you are in a hole but if you have space to "move around" then you have more options.
For those in a hole your first goal should be get out of the hole as that is a very realistic thing to have as a goal.
If you do have some room to move around and stretch your legs then you have the options of setting goals for saving, investing, and spending as well as goals for streams of income if you have multiple.
When setting goals the part that makes them achievable is if you have the ability to make a step by step guide for yourself. Once you have created the steps do the first one and look to see if you have learned anything new to help create more of the path you have in front of you. As you go you will learn the proper steps to take but make sure you can make the first couple steps alone and be prepared to be humbled for how much you think you know vs the reality of your financial knowledge.
Make sure you are tracking from your progress and regularly go back to see your mistakes that you have made along the way when you get down, then look to your successes. Your failures will tend to out weigh your successes unless you are unnaturally lucky so this will help you put the perspective of "Failure is just a learning experience" in to your mind, and from what I find this is the easiest way for this concept to fully click in your mind.
Seek Professional Advice
For a more personalized Financial Analysis for your personal situation the best thing to do would be to go and consult with a Financial Advisor. This is a profession who is dedicated to helping you with figuring out your finances for those who need the extra help with the Financial Discipline. Your bank most likely already has a Financial Advisor on their staff so that should be the first place you check, but for those people who don't have access to that a simple google search for Financial Advisors Near Me and a guarantee that a abundance of Advisor Facilities will show up for you.
Practice Mind-Full Spending
For those who think that the Professional Option is too pricy my recommendation for you would be to practice mind-full spending. My personal rule with mind-full spending would be two rules, one for under $500 purchases and one for over $500 purchases.
The first rule (being for the under $500 purchases) is known as the 24 hour rule. This rule is for when you are out and you see something that you really want but isn't in your expenses category. This is when you would initiate the 24 hour rule. for the next 24 hours you will not make any unnecessary purchases and by the end of it if you still want it then go get it, but if you don't then leave it as an after thought. For this rule I say under $500 because the $500 point tends to be where people stop for their impulsive buys. This allows you to fully assess if you actually want it or if its just an impulsive buy.
The second rule is a little bit more different. Any purchase over $500 is from now on qualified as a major purchase. If this is the case then we must take more time to think over the purchase as opposed to the impulsive buy. The reasoning for this is because sometimes even when we think a major purchase is what we actually want it might just be that we are instead trying to impress someone else or make ourselves look better for having expensive material things. For this rule I will ask that you wait 3-7 days to make the purchase. This will ensure that by the end of it you have been thinking about it for multiple days, not because someone else's opinion has affected your thoughts but because you genuinely want to think about getting that purchase.
If both of these rules are practiced properly than you will start to notice very quickly that you will start having extra piles of money starting to build up.
Diversify Income Streams
The easiest way to help with your Financial Stresses and to start getting on track with your Strategy and Management of your Finances is by Diversifying Your Income Streams.
What I mean by this is when you are working 1 job you have one source of income. Yes you could Diversify by getting another job but our goal here is to make you extra money while you are already doing the things you typically would.
There are many ways to Diversify your income, the two main categories from what I have found is Investments and Passive Income. When it comes to both of these categories there are many different rabbit holes to go down so I will try my best to simplify the ones I believe would be best for anyone to begin with.
For Investments you have two main types of stocks you should look into. A Mutual Fund being One and an Index Fund being the Second. Bonds and Commodities (Natural Resources) are also great things to go into depending on how the market is playing. These options are all great opportunities for you to Diversify your long term gains portfolio as all of these options if done with enough time consistently should result in gains of 3-10% returns compounding yearly. My best personal recommendation is to choose the S&P 500 as your main stock for your portfolio. It is a Fund comprised of the top performing 500 stocks which regularly is updated. Average % return is around 3-10%.
For Passive Income there is a lot of different options. For most renting properties will be the best thing as you can make a lot of money off of this, but a better way is to fins out what you enjoy and create a small business centered around this thing. Over time while you build this business you will learn things you never knew you could do which will help with confidence while also giving you information to try again if you fail the first time. You could also just do weekend flips where you go out and sell things you purchased online for more than you originally purchased them for. The Free Stuff Section on Craigslist is a great place to begin with this.
Stay Informed
The absolute best way to stay ahead of your Finances is by having an idea as to what the Market is going as well as the health and strength of different Sectors of the Market. Ways you can do this is by paying attention to everyday things such as, do you see many people at the coffee shop you tend to go to that's typically busy? Does your paycheck seem less even though its the same amount? Do you feel like you have been working extra as compared to say 1-2 years prior? These very well could be signs of a Bad Market. When using logic like this though you must attempt to also add as many factors from your local area in to be conclusive. This is good really only for your local area, this will help you be able to adjust your budget properly as you know how much you will actually be spending as opposed to calculating for someone 500 miles away. For your Investments I advise you pay attention to Business News shows such as CNBC, or the former ThinkorSwimTV currently Schwabs TV. Both of those are great options for seeing the full market while also bringing on CEOs during times you might want to hear from them if you are Invested in their company.
Learning about Intermarket Trading is also very important as you learn the relationships between the Markets and how they all affect each other.
Practice Self-Care
Self Care is very important for your Mental Health and your Mental Health is in my opinion the main factor in how your Financial Health is doing. This is not to say that Money will make your Mental Health better but to say that with a Healthy Mind you will be able to get a healthy savings. Some good common ways to help with mental health are Self Affirmations, Exercise, Getting Some Sun, Socializing, Reading a Book, Meditation, Journaling, Breathing Techniques, and You may have some of your own that you can personalize by doing the things You like to do. Just make sure that what you are doing is Healthy and NOT Damaging to your Mind. Proper Hygiene Daily should also be a MUST. At least One Shower, Deodorant in the morning, Brush teeth morning and night. If you start talking care of yourself you will start to notice you have more energy and what seems like more time to do the things you need to.
Before I move on I would also like to say that Self-Care isn't just Internal but External. Make sure the people you surround yourself with are people who bring up your Mental as opposed to those who wish to see it Shatter to Dust. If your team is working against you, then you will never win your war.
Adapt to Changes
To close out I would like to remind you that the best way to keep on your Financial Goal is by regularly updating it. Each week, unless you receive the same amount of money from all streams of income will have a different amount of income to it so update it weekly and track progress daily. This will make sure you are constantly having an accurate Budget while also being able to hold a safe mindset towards your Investments as you know what has been going on with the Market.
Finances shouldn't be scary and that is one of our main goals here at ΝΔΤΩ so if you thought that this article was helpful then please make sure to check back here regularly for more Blog Posts like this one. Hope you have a great day or night depending on when you're reading this.
