When your finances are in trouble, you often experience a sinking feeling in the pit of your stomach. You panic that you might not be able to have the lifestyle you would like.
Fortunately, there’s a solution. In this post, we take a look at some of the devastatingly effective methods you can use to turn your financial life around.
1. Get Your Psychology Right
The first hurdle to overcome is your own psychology. You can often find yourself in a pit of despair, wondering how you managed to get into such a dreadful financial position at the age of, say 30 or 40. You thought you’d have thousands of dollars in the bank by now, but you don’t. And that can be distressing.
It won’t surprise you to find out that this kind of thinking is unhealthy and unhelpful. It suggests that you should have been at a certain stage financially by a certain point in your life. And it implies that you’ve failed because you haven’t quite got there yet.
When it comes to personal finances, though, there are no rules. Nothing is set in stone. We’re all part of an economic ecosystem that regularly throws challenges at us. It’s not unusual for people to fall behind on their “life plans.”
So what can you do if you find yourself the victim of negative thinking?
There are two psychological tricks you can use here to get yourself out of a thinking rut.
The first is to recognize that there will always be more opportunities to make money. Just because you’re past a certain age, it doesn’t mean you no longer offer people value. In fact, it’s often the opposite. The more experience you have, the more money you can make.
The second step is to avoid focusing on “what could have been.” The truth is that you don’t know how your financial life would have turned out in an alternate universe because you didn’t live that life. Speculation is just a way of punishing yourself with regret. It’s not worth it, and it gets in the way of achieving your goals.
2. Take Time To Write Down Your Financial Goals
Do you actually know what your financial goals are?
A lot of people don’t. If you ask them how much money they want to have available every month, they have no idea. $10,000? $100,000? They’re not clear.
The best approach is to actually calculate how much money you’ll need to spend to live “your best life.”
Write down all your monthly expenses, including housing, transport, entertainment, traveling, and recreation. Don’t be shy. List the things that you actually want from your life and then create a total.
Here’s an example:
- Holidays abroad four times a year – $30,000 per year
- Regular spa sessions every fortnight – $10,000 per year
- A home in a good neighborhood – $30,000 per year
- Membership of a local golf club – $3,000 per year
- Ownership of a 4×4 and sports car – $10,000 per year
Once you have a list like this, you can add up the total and see what you need your annual income to be to live your life how you please.
Remember, what you put on this list is entirely up to you. It can actually be a helpful way of discovering how little you need to live a happy and fulfilling life, allowing you to escape from the treadmill of work earlier.
3. Splurge On things That Will Make You Wealthier
A lot of people believe that the only way to build wealth is to start a company or invest in the markets. But it’s not as simple as that. Great people tend to build themselves first and then sell their skills later, generating massive returns.
It’s a good idea, therefore, to get into the habit of investing in yourself. Instead of spending money on a holiday, for instance, you could borrow money through lenders like Plenti.com.au to pay for an education or professional qualification.
This strategy works because you’re increasing your earning capacity for the future. You might not have much spare cash right now, but once you do the necessary learning, that can all change dramatically.
Remember, you don’t have to go back to college or spend time in student halls. There are now plenty of qualifications available online, many of them offering a higher standard of service than you can get through mainstream channels. What’s more, they’re considerably cheaper and fit around your regular work.
4. Get Smart About The Money You Give Your Family
Naturally, we want to look after the people we care about. But simply handing over money forever can leave us out of pocket in the long-run.
So what’s the best approach here? The best approach is to be strategic and build their capacity to earn. Never hand out money unless you think there’s a realistic chance of being paid back.
If possible, look for opportunities for people to find productive work. Search job ads, use your network of connections or have a frank discussion about the value of work.
Whatever you do, don’t sacrifice your own savings, especially if you’re about to hit retirement. Look for ways to support people through their crises, but recognize that money isn’t always the answer.
5. Sell The Stuff You Don’t Need
Some people get into financial trouble because they accumulate more stuff than they actually need. They spend a fortune pursuing random projects, without considering whether they actually contribute to their lives in any meaningful way.
If you’re in this situation, then start selling. eBay.com is a good place to start. Here you can list all the items you no longer want and recoup some of the money you spent – particularly if they’re in good condition.
Certain things like electronics and bicycles tend to sell particularly well, although you may also be able to flog jewelry and watches.
Turning your financial life around can seem like a massive challenge. But once you start taking small steps, it quickly falls into place.