For many people, personal finances are a major stress point. From overwhelming debt to underperforming budgeting efforts, nearly everyone has room for improvement when it comes to their money. And, whatever your money goals may be, you will find that your mindset and the way you think about money plays a big role in how successful your efforts prove to be. Thinking through the numbers and working through the emotions around your finances can help you rethink your personal finances and become a better investor, saver, or budgeter as a result.
1. Diversify your portfolio.
Why is diversification of investments important? By investing in different types of investments—like the US and foreign stocks, bonds, and alternative investments like real estate—you’ll minimize the volatility of your portfolio. The stock market may be the most common investment United States investors think of but the market risk can be high. A diversified portfolio allows you to decrease the risk of your investments by keeping your eggs in more than one basket, so to speak. If your stock portfolio crashes, the diversification you’ve in place will ensure that your investments as a whole don’t crash along with it.
2. Remember that money is emotionally neutral.
Many people find that their finances bring about a slew of emotions, be they positive or negative. Stress and anxiety are natural when you don’t have enough money or savings, or are faced with a major purchase. Or, if you find yourself with a sudden influx of funds, it’s normal to feel excited or have the urge to indulge in a special treat. But it’s important to remember that money in and of itself isn’t emotional—the adage of not being able to buy happiness is true. If you can separate your feelings about your budget from your finances themselves, you’ll be better able to manage your money, however much of it you have.
3. Revisit your budget regularly.
Optimally, you should be revisiting your budget at least each month to make adjustments as needed. The same is true if your income changes, you meet a financial goal, or you take on new debts. But you don’t need an event or point on the calendar to spend some quality time with your budget. Coming up short? Find places to cut back, whether you stop overpaying for internet service and other budget must-haves or minimize your non-essential spending. Adjust the amount you save from each payment to grow your emergency fund more quickly or add a new category for your newly-adopted furry friend. Your spending rarely stays the same from month to month so your budget needs to change, too.
4. Automate your savings.
With necessary expenses and entertainment costs always looming on the horizon, it’s no surprise that many people struggle to save money. By creating an automatic savings plan, you can make the process a little easier. Whether you’re putting aside funds for a rainy day or saving up for a major purchase, having a certain percentage of your income or set amount each month moved into your savings account automatically can minimize the effort you have to put into savings.
5. Develop a money mantra.
You’ve probably heard that your “why” is important in goal-setting, and your financial goals are no exception. Find a personal finance quote that resonates with you, write out your top money goals, or add a photo of your top wishlist item to your wallet. Whenever you find yourself losing motivation or momentum with your money and personal finance goals, remind yourself of your mantra or reason for setting those goals in the first place.
You don’t need to have a lot of money to be confident in your investment portfolio, budgeting ability, or overall financial security. With a bit of thought and effort, you can enjoy higher returns, greater savings, and more confidence when it comes to your money. By spending some time negotiating your internet bill, diversifying your investment portfolio, or bettering your money mindset, you can rethink and revolutionize your financial wellbeing.
