Whether you are a millionaire or just an ordinary middle-class, there is always room to improve your finances. But beware: there is no quick fix to revamping your financial life; instead, it requires careful planning, patience and discipline.

To get you started, here are five ways to improve your financial condition in 2019 and in the coming years.

1. Review your current situation

How can you improve your financial situation without knowing its present condition? Comb through your current finances, including credit card debts, bank loans, mortgages, monthly expenses, savings, taxes and investments. The purpose of this review is to determine your financial net worth.

What is net worth? 

Net worth is simply what you have minus what is owed. To determine your net worth, make a list of all your debts such as your credit card balances, personal loans, student loans, auto loans, home loans, and so forth and a list of all your assets. This includes retirement savings, your current checking and savings account balances, any bonds you might have, the total value of any stock holdings you might have, your home, and your cars.

Next, add up the value of everything you own and subtract from that amount everything you owe. The resulting number is your net worth. This careful review will help you to determine if your financial situation appears to be on track or not.

2. Avoid bad debt

The rule of thumb for maintaining a healthy financial condition is to avoid non-value-added debt, or bad debt that generates zero or negative returns.

For example, using your credit card to purchase clothes, smart phones, electronics or big-ticket purchases like a furniture is a classic example of bad debt. Credit card debt only gets expensive over the course of time, as the interest rates are quite high and continue to accumulate month by month.

The bottom line is, avoid indulging in purchases you cannot afford, especially using your credit card – or credit cards. Purge your online shopping frenzy. You don’t have to spend lavishly on clothing, accessories and gifts when you are already in considerable debt. Unsubscribe from the e-commerce newsletter and delete any e-commerce apps from your mobile phone. Buy what you need, not what you want.

Try to first pay off the bad debts that carry the highest interest rates. Make it a point to pay all your monthly dues promptly. It will not only prevent you from getting charged for late payments, but also reduce the risk of piling up bad debt. Getting rid of personal debts can be difficult. If necessary, try talking to a credit counseling firm.

3. Don’t put all your eggs in one basket

Once you have reviewed your current financial situation, the next step is to sketch out a financial plan. Savings, as well as investments, play a critical role in your financial planning. With proper management, you can turn investments into additional sources of income.

Conservative investors can invest in gold. Alternatively, you can also put your money into savings accounts, time deposits, government bonds, mutual funds and stocks. For long-term investment, consider buying a property. You can also invest in online crowdfunding sites, earning as much as a 20% return on your money.

Ultimately, it is your decision where, when and how much money you would like to invest. Just make sure you are making a well-informed investment decision. Most importantly, don’t put all your eggs in one basket. Try to have a diversified investment portfolio so your assets will react differently to market fluctuations. That way, if one asset falls, the others may rise, keeping your investments safe.

4. Stick to your financial goals

Setting up new financial goals is only the first half of the equation. The other half is sticking to your goals, which is the most demanding part. One way to stay on top of your financial goals is to monitor your monthly expenses. You can either maintain a small pocket diary or use a mobile app to track your daily spending. Be honest and as detailed as possible.

Breakdown bigger financial goals into smaller and more manageable portions. For example, if you want to repay considerable credit card debt, consider paying a little more than the minimum amount due each month while cutting back on unnecessary shopping expenses.

When it comes to investments, however, you should focus on future value rather than what you are investing now. As improving your finances is a long-term commitment, you should also think about having a budget buddy. Ask one of your family members or friends to keep an eye on your financial behavior. This person can support, discipline and motivate you throughout your financial journey.

5. Update your financial knowledge

Regardless of whether you hire a financial advisor to manage your finances or you prefer to do it yourself, you must keep your financial knowledge up to date. You should not only understand the fundamentals of economics, such as savings, budgeting and compound interests, but also the latest developments in investment and banking.

The internet offers a plethora of information, from websites, news outlets and blogs related to finance and economics. The more you know, the better. However, make sure you are acquiring the information from reliable sources. And act only if it is accurate and relevant.

Source: The Jakarta Post