It is impossible to solve a problem if the root of the problem is not known. When small financial hurdles arise, these are usually just a symptom of a much bigger complication. In order to identify the source of your financial problems, you must make a diagnosis that analyzes the general state of your finances, and not only the parts that are apparently not working.
Find out how you can improve your situation with money by diagnosing your finances. Answer these questions below. (Don’t worry. There are no good or bad answers.)
- Do you know exactly how much you earn?
- Do you have a fixed income or do they change every month?
- Do you share expenses with someone else?
- What is the payment method you use most frequently?
- What percentage of your income do you require to cover your fixed expenses?
- Do you have a monthly budget?
- Do you know what your variable or expendable expenses are?
- How much do you usually save per month?
- What savings system do you use to save your money?
- Why do you save or not?
- Do you have financing?
- How often do you use your credit card?
The point of this exercise is to expose possible red spots of mismanagement of your finances. As we mentioned at the beginning, the diagnosis has to be comprehensive, that is why you must analyze money management from several perspectives: income, savings, expenses and debt. Once you are clear on the answers to all the questions, you will be able to identify the root of your financial problems.
Lack of a fixed income or insufficient income to cover the most basic needs can cause economic instability. In these cases, the problem can be solved by obtaining a second source of income.
When there is no emergency fund or money is not saved to meet medium or long-term goals, it can lead to debt or stagnation. To avoid this, always save at least 10% of your salary. Expenses Spending uncontrollably or beyond your means is one of the main reasons why your finances may become unbalanced. Measure your expenses and limit yourself to buying only what is necessary.
Living on loans for bad credit can be very dangerous. Learn how to use financings responsibly or otherwise, refrain from resorting to them. Identify the areas of opportunity and put your finances in order. If an unforeseen event arises, resolve it quickly to avoid increasing expenses.