Being a financial rockstar means that you have ultimate control over your money. You don’t let your finances, or lack of, get the better of you. You don’t have to be rich to be a financial rockstar, you just need to get your priorities straight and do the right things with your money.
Here are the first stepping stones to becoming a financial rockstar in the future:
Identify clear financial goals that you actually stand a chance of achieving, whether that be saving a certain sum to put a down payment on your next house or saving a certain sum of money for a rainy day.
If you want to really get on top of your finances, you should aim to make short, mid and long-term goals. Short-term goals are ones that you would like to meet in under 1 year, mid-range goals have a 1-5 year target and long-term goals are things that could take many years to come into fruition such as retirement savings,money for planning funerals when the time comes, or savings for when your children fly the nest and go off to college.
Workout how much money you will need for each goal and divide that into a monthly sum. You could save all of the money for your goals in one account, but it might be a better idea to set up different accounts for each goal, if you don’t want to get mixed up.
Look at Your Current Financial Situation
Of course, it could be difficult to start planning and saving for future goals if your finances are in poor shape now, which is why it is important to take a look at your finances and see if there are any changes that you need to make. For example, you could be spending too much on non-essentials, causing you to go overdrawn each month or you might not be paying enough into your pension plan. Sort issues like this out and you will have a much clearer idea of how much you can really spare towards your goals.
What are Your Assets and Liabilities
Your assets are the things you own that are worth money. They could include your home, cars, stock options and bonds. Liabilities are things like car loans, mortgages and credit card debt. You can use your assets and liabilities to work out your net worth by subtracting the later from the former and it is a good idea to do so if you want to get a good idea of the direction you’re heading in, good or bad. Do this at least once a year and you’ll always be in the picture regarding your finances.
Assess Your Cash Flow Situation
If you have no idea where your money is being spent each month, you need to assess your cash flow situation. Take the time to track your incomings (work, pensions, dividends etc.) and outgoings (mortgage payments, bills, credit card payments etc.) to accurately assess your monthly spending, see where you are spending too much or too little and balance your personal books. After all, you can’t get to grips with an issue and boost your financial rockstar status if you don’t even know what you are dealing with. That would be like trying to play a gig when you don’t know any of the songs!
Improve Your Credit Score
Sometimes, it pays to take out a line of credit. For example, taking out a mortgage to buy your own home is an investment which will (hopefully) make you money, whereas paying the rent will get you nowhere fast. However, if you want to take out credit, you first need to deal with the matter of your credit score.
Having a good credit score is like being a huge rockstar – doors will be opened to you. A high credit score will give you access to important lines of credit, including mortgages and car loans, so you need to do your best to keep a high score. Credit scores are calculated on your credit history, the amount of credit you have and your payment history. So, if you want to rock your finances, you first need to build up a credit history (if you haven’t already). Borrowing to establish credit can easily be done by taking out a small loan or payment plan. Just be sure you make all the repayments on time to avoid a poor credit score.
You should also try to keep the amount of credit you are using to around 30 percent of what is available to you at any one time. This shows lenders that you are a responsible borrower, who is not likely to get into difficulty with your debts.
Banks aren’t exactly offering the best interest rates at the moment, so you might want to consider doing something more with your money. Investing in stocks and shares is a great way to see bigger returns on your hard-earned cash, but there is a downside – there are no guarantees. So, you will need to do your homework and find the best low-risk shares available to you, unless you’re willing to take a gamble.
Hire a Financial Adviser
If you can afford it, and you have a significant sum of money in your possession, you might want to hire a reputable financial adviser. Not only will financial advisers be able to point you in the right direction of sound stock and share investments but they could save you money on your tax bills, help you to organize your finances for maximum returns and ensure that you have a good pension when you finally retire.
Of course, there is nothing more important you can do if you want to reach financial rockstar status than spend your money wisely. There is nothing wrong with buying a few treats here and there, but if you want to be financially stable for the rest of your life, you need to think carefully about all of the purchase you make, and avoid frivolous spending unless it is on something that will truly make you happy and enrich your life.