Why Financial Success Is More Than Just Budgeting
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The term budget was probably one of the first words you learned in the infancy stage of your financial journey. Budgeting is a tool that allows you to properly acknowledge, assess, and act on your monthly income and expenses. It has been an integral part of helping many get in tune with their money for many years. However, it is time to reimagine one of the most revered terms in the financial literacy lexicon. 

When people use ‘budget,’ they tend to make it conducive around their bills. People mostly say “I am on a budget” because they are creating around their expenses rather than the goals they aspire to reach. I prefer to replace the word budget with a spending plan because the latter focuses on what you want to achieve rather than what you want to afford. Managing your financial progress should go beyond creating a plan for your hard-earned money. 

Here are routines you can implement that’ll help you reach your financial goals. 

Track your net worth. 

Keeping tabs of your current income and expenses helps you understand where your money is going but tracking your net worth helps you understand how your money is growing. Your net worth consists of tracking two key financial components: your assets and liabilities. It simply reveals how much you own versus how much you owe. Assets include cash, investments, and equity while your liabilities include debt (student loan, credit card debt, mortgage, and car debt). 

Staying on top of your net worth allows you to see the progress you’re making when it comes down to achieving your personal and family goals and building inter-generational wealth. Essentially, if your assets exceed your liabilities, then you have a positive net worth and if your liabilities exceed your assets, then you have a negative net worth. One of the best apps and sites to use to track your net worth is Personal Capital. The platform allows you to sync all your bank accounts, investment accounts and debt accounts and it will calculate your net worth for you each month. 

Monitor your credit reports.

Your credit score is the financial grade you receive based on making payments on time and in full. Mostly everyone focuses on the credit score(s) but don’t understand that the credit report is the most valuable. It is like the comment section on your progress report. To understand why you received the grade, you must be aware of the reason you received the grade and ways you could possibly improve for the future. Monitoring your credit report doesn’t just help you correct your own financial behavior, but also identify fraudulent activities that could negatively impact your credit score. You want to make sure when it’s time to apply for that dream job, car or home your financial report card is in good standing as it can affect the interest rates you receive as well as your job application process. 

There are three major credit bureaus – Experian, Equifax and TransUnion. You can check your credit reports for free on AnnualCreditReport.com and due to the COVID19 pandemic, you can review them weekly for free. Under normal circumstances, checking your reports weekly may be excessive but due to the increasing level of data breaches occurring, you should check it more often than you do. 

Audit your financial responsibilities.

Creating a spending plan shouldn’t just include evaluating personal fixed and variable expenses, but also should include a line item for financial resources given to family who depend on you. Most times family financial obligations aren’t even in the ‘budget’ or plan because it’s done on a whim. It’s understandable that you have a soft spot in your heart for helping others and feel obligated to be consistent in your giving. However, you must consider the financial goals you’ve set for yourself and feel justifiably obligated to accomplish them just as much as you feel obligated to help others achieve theirs. It’s imperative that you audit your financial obligations and establish a new tone. You must be firm on the amount you are willing to give those who depend on you and abide by it no matter how much your feelings get in the way. 

Evaluate your income progression.If you were to review your personal goals today, you may probably discover that your annual income does not align with where you wish to be. You may live in a city with high rent prices, gas prices, and/or property taxes and you feel as though you are barely making ends meet. You may also feel discouraged because you’ve been previously denied that promotion, raise and position at your current employer. Even in the face of discouragement, it is possible to feel empowered when it comes to increasing your income. You must be reminded that although your employer oversees your salary, you are in control of your income. Assessing your income progression goes beyond making sure you obtain a 3% annual raise. It is also making certain you maximum your earning potential by tapping into the gifts and talents you possess.