How to master your money this year

“I am the master of my fate: I am the captain of my soul.”

This famous quote is often used in motivational speeches – at its heart, referring to taking control – stepping up and taking responsibility for the direction your life heads in.

It’s therefore interesting to look at this quote in relation to money and finances.

Historically, women in particular have been unable to be in control of their own money, instead being subservient to the men in their lives whose names were on the bank accounts or mortgage deeds.

Control is also a significant feature for those facing financial difficulties; the moment that individuals step on the slippery slope into serious debt is when they no longer have control over their money, but rather their money controls them.

The topic of money and control is actually a fascinating one – especially when it comes to power dynamics. But for the purposes of this blog, we’re going to concentrate on how can you become the master of your money this year, and in turn, control the fate of your financial future.

Here are 4 areas for consideration…

Education

The first step to taking control of your money has to be to gain a full and complete picture of your current financial situation. Many people have a ‘fear of finding out’ and therefore avoid assessing the extent of their current financial affairs – even if subconsciously. Digging out all of the information you have on any bank accounts, savings accounts, pensions, other investments and property assets, along with the details of any loans or debts and compiling it on one place will give you a full and frank picture. This exercise may also encourage you to become more organised about your finances – another step in the right direction.

From there, it is worth investing the time to educate yourself on the options available to you. The world we live in means that information is abundant – so if you’re serious about gaining better control of your finances, ignorance is no excuse. A word to the wise – not all information is equal; make sure your information is from a trustworthy source and is relevant to your location to avoid poor quality or out-of-date information.

Planning

With full knowledge of the current state of affairs, its time to set out on your conquest to bigger and better things. But you won’t be able to get very far without a route to follow or a destination!

This is where setting goals comes in – a subject we recently blogged about here.

If you don’t have the benefit of advice from a financial planner, there are several basic steps you can undertake yourself in order help devise a financial plan.

First and foremost, you need to be on top of your income and expenditure, knowing exactly where your money goes each month and therefore being able to identify any areas of weakness. Either keeping a spreadsheet or using an app can make this process easier.

Making the distinction between essential expenditure and discretionary spending is also a useful step – especially if paying off debts or building up savings is one of your goals.

Using the knowledge gained from the previous step, you can then set out the ways in which you can improve your outlook, which will of course vary depending on your starting position and your immediate and long-term goals.

Commitment

Like most things in life that are worth achieving, financial planning involves a degree of hard work – some of which only you and you alone can undertake. Putting a plan in place is only the very first step; the hard part is seeing it through.

This is ultimately what financial planning is all about. Putting money into ISA’s, building up a pension or investing in stocks and shares isn’t a ‘get rich quick’ scheme. It isn’t about making quick returns to be able to splash out on an exotic holiday or lavish gifts. It’s about making a long-term commitment in order to provide greater choices later in life.

Investing

One of the concepts that is important to grasp is that saving money isn’t enough to secure long-term financial stability. The majority of easy-access bank or savings accounts, along with cash ISA’s, have savings rates that are below the current rate of inflation. This means that holding money in low interest rate environments over a long period of time effectively means the value of that money is eroding in comparison to the rate at which prices are increasing.

This is the reason that the majority of financial portfolios include investments of some form. One of the most popular tools for investing is a stocks and shares ISA, which allows you to invest in funds or companies within a tax free environment. We have written more on this, along with some of the other basics of investing, here.

Mastering your money is by no means an easy task. For some women, this is one of the reasons they chose to engage a financial planner – so they have a helping hand to get – and keep – them on course. For more information on how Addidi approach the financial planning process or how we may be able to help, please get in touch.

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