Updated: Feb 12, 2020
These days, everyone talks about the life changing benefits of mindfulness. An aspect of mindfulness is often overlooked, but is equally beneficial and important, is what we like to call your "Money Mindset". The money mindset is one has when keeping their financial situations in mind when making decisions. This can be as easy as saying no (or yes, depending on your budget) to that iced coffee or as complex as buying a house. Everybody’s money mindset is unique, with no two alike in style, preference, and goals. Over the next ten weeks, we will be diving into the “Money Mindset” and providing tips and tricks to help you achieve and sharpen yours.
The basics of money management are the fundamentals to the money mindset. Having a solid understanding of how and where you spend your money supports a strong financial foundation in which you can build upon. Here are some tips for money management:
Create a Budget
Create a budget based on your monthly income and expenses. A budget is the tool that gets you to stay on track financially every month. A budget shows you exactly where your money is going so you can know whether you’re on track with your income and expenses. It’s your blueprint for achieving your financial goals.
See our recent post on How to Budget Like a Pro here
Track Your Net Worth
Track your net worth to get the big picture of your entire financial situation. Your net worth is a snapshot of your assets and liabilities at a given time. Your net worth measures what you’re actually worth financially. It’s important to know what your net worth is if you want to build wealth. It’s not enough to only budget. You need both a budget and to track your net worth.
Calculate your net worth here
Check Your Credit Score Regularly
Check your credit reports from each credit bureau (there are three) annually using annualcreditreport.com. Even if your credit card company offers credit monitoring or reporting, it’s a good idea to check your actual reports through this site to get your official reports. The reason you should check your credit reports annually is to verify all the information is correct, and make sure your identity hasn’t been compromised.
Get the Right Insurance Coverage
It’s important to have the right insurance coverages in place to protect you and your family financially. This includes property and casualty insurance, medical insurance, life insurance, and disability insurance, just to name a few types. It’s easy to overlook insurance, but if something tragic or unexpected happens to you, it would be even more devastating without the right insurance.
Project Your Taxes
Tax planning is one of the most effective ways to save money every year. If you have the opportunity, talk to a CPA or financial planner to do a tax projection for you. If you do not have access to a professional, a good rule of thumb is to assume 30% of your gross (pre-tax) income will go to taxes. You can then compare this to the taxes currently being taken out of your paycheck and project whether you are withholding enough or not. You may also find ways to save money through tax planning that you’re not taking advantage of.
Set Financial Goals
The best way I know of to change where you are financially is to set goals. Goals give you a target to plan ahead for. If you need to payoff debt, save for a house, or something else – you can use goals to help you get there. These goals should be SMART: Specific, Measurable, Attainable, Realistic, and Time Oriented. If you follow this model for setting goals, you can change your financial situation, and ultimately your life.
Have Financial Planning Meetings
Have a set time to review your finances yourself and/or with your spouse. You need to review and reevaluate whether what you’re doing is working. You need to make changes as your life changes. We recommend reviewing your money weekly so there’s less to go over at each meeting, but you can decide what works for you – monthly or quarterly may fit with your life better depending on where you are financially. The point is to not set it and forget it. Your finances need to be reviewed periodically.
Have more questions? Call today for more information on how we can help you achieve your money mindset