Guide to Improving your Personal Finances

Most of the new investors head towards setting up a portfolio without having any significant rationale behind their action. They usually do it with the intention of planning for their retirement or to have an IRA and a 401(k). Though this attitude is better than being indifferent towards your family’s balance sheet and income statement, it is not the right way to make money. To improve your finances, the first thing you need to do is being clear about your financial goals. You also need to be clear about whether you are taking the right steps for the improvement of your finances. You need to answer three questions to clarify your financial goals, and find the right way to attain the goals.

What do you intend to achieve through your investment portfolio?

Start improving your finances by identifying your objectives. What is the reason behind your saving money? What is the reason behind investing and making money? In other words, what do you intend to accomplish? It is shocking to know that a large number of investors have never asked themselves these questions and do not have clear answers for them.

Investors are advised not to state goals like wishing to move to another place, or wishing to build a home or some other property. Instead, investors need to have specific goals like wishing to move to a new home of at least 2000 sq. ft., within 4 years. Investors also need to be specific about whether they would buy the home in cash, or would go for a mortgage. This sort of planning would help investors to make money in a better way.

What amount of money do you require to attain your objectives?

After figuring out what you want to accomplish with your money, you need to find out the amount of money you would need to accomplish it comfortably. You need to find out the amount of cash you require in your account per month, after all your taxes and expenses have been paid. Do not state ambiguous objectives like “I wish to be comfortable”, since these are almost useless. Being specific is extremely important since when you have clear benchmarks, only then you can figure out whether you are succeeding or failing.

The monetary needs for each one of us is completely different. Some people need more money, while others can live happily with less. These differences also occur because everyone is different in terms of desired comfort level, hobbies, passions and psychological profile. Be honest while determining your monetary requirements.

What strategy are you implementing to make money?

You may think that the only route to making money is to sell your time for a paycheck. However, the most successful people in the world did not opt for this way for making money. There are many ways to make money. You may invest in an asset which sells something else for you, instead of your time. You may also own shares of a company. You may focus on the assets of natural gas and oil. Purchasing a business like a hotel or retail shop in your city is also a good idea. You need to design a strategy to improve your finances. Try to opt for a way that makes use of your strengths so as to minimize the risk. Stick with the strategy and see your finances getting improved.

Conclusion:

Try to answer these questions honestly. This would form your step towards improving your personal finances. Take relevant measures to clarify your financial goals, determine the amount of money you need and design an effective strategy to grow your money.

Author Bio: James Patrick is an expert on the subject of business and finance. He regularly contributes on articles on alternative investment through Ethicalforestry.com and other related topics. Follow him here on Twitter.