There’s a theory according to which you need to invest 10,000 hours in order to master a certain skill. The problem with testing this theory starts when we start talking about the art of finance. On the one hand, this is the activity that we’re engaging in on a daily basis, seeing as how paying, receiving payments, taking receipts and making simple estimates all come under finance. So, how come there are so many people who are bad at it, despite the fact that they’ve invested so many hours into it? The truth is that mastering the art of finance takes more than just time. Here are five things you need to understand in order to see these things more clearly.
- Keep a ledger
The first thing you need to learn in order to become good at finance is to learn how to keep track of every single dollar you spend. This is really not that hard, provided that you have a tool for doing so. In the past, a notebook would be a suitable solution to this problem but, nowadays, downloading a tool tends to be a lot simpler and more effective. It also gives you an analytical insight, seeing as how most of these apps have tools that help you see your spending by the category.
The mistake that a lot of people make here is to completely ignore cash purchases, due to the fact that they see them as minor. Sure, the money for the utility bill, a credit payment, rent and gas may be major items on the list. Nonetheless, if these minor purchases happen frequently enough, you just might get yourself in a dangerous situation. For instance, chances are that you’ll spend $270 per year on fruit, almost $400 on alcoholic beverages and as much as $140 on things as trivial as condiments and seasonings. The list goes on and on and the more you keep track of it, the easier it will be to manage your finances.
2. Learn a thing or two on the subject matter
The next thing you need to understand is the fact that basic financial planning is not really that complex but it does require some basic training. Becoming skilled in this field may help you avoid the need to hire an accountant which could save you a small fortune in the long run. Other than being able to handle your taxes on your own, you also get to understand various financial processes a lot better. Needless to say, this is a skill that everyone can benefit from.
Now, there’s only so much you can learn on your own and seeing as how learning on experience can be incredibly expensive when it comes to the topic of personal finances, you should probably find a course to enlist on. Other than just finding a reliable RTO, you also need to focus on finding adequate learning materials. Therefore, you should look for leading providers of RTO training resources in Australia in order to always learn from a reliable source. The cost of all this is more than justified by the money you stand to save on the services of a financial expert.
3. Exercise restraint
Perhaps the most difficult task of all is exercising restraint in order to improve the financial health of your household/enterprise. Even in scenarios where austerity is the only way out, it may be quite hard to try and live this kind of life. This means that you know exactly what the problem is with your finances, know exactly how to fix it, yet, lack endurance to actually see it through. Self-discipline takes practice and getting educated on this topic will definitely help give you confidence, as well as provide you with all the necessary motivation.\
4. Validate your financial plans and ideas
Sometimes, spending money on a certain item or making a certain investment may seem like a no-brainer, only for you to discover that spending your money on it was a bad idea all along. Sure, sometimes, it’s impossible to discover this unless you’re doing so in a retrospect but there are some scenarios where you just failed to look at this idea realistically. Upon discovering something new, we’re all overwhelmed with emotions which may cloud our judgement.
Fortunately, there are so many ways to validate an idea. Two simplest ones are A) letting some time pass and then considering the idea again and B) asking someone else for their opinion. Sure, both of these methods have their flaws. For instance, time alone (without any new information on the subject matter) may not be able to change anything and the person you’re asking may not have enough knowledge on the subject matter. Nonetheless, skipping the validation process altogether is always a bad idea.
5. Time is money
Finally, you need to understand that your time is an asset even if you’re still unaware of its value. You see, if you’re employed, it wouldn’t be that hard to figure out what an hour of your work is worth. Nonetheless, how do you put a value on your free time? Different tasks are also differently treated according to their difficulty, which means that an hour of doing landscaping and an hour of doing laundry isn’t exactly comparable with a 1:1 ratio. This is crucial when choosing which services are worth paying for (when you’re looking for some help) and what you should do on your own. Time is money and you need to start treating and managing it as such.
Once you apply these five principles, you’ll suddenly start seeing things that weren’t there before. As a result, you’ll have more resources, yet, this is in no way an end to this journey. More money means more financial options, which creates a new challenge of its own. Still, for those who are willing to endure this, the reward is more than worth it. Financial stability of one’s household and their ability to afford the lifestyle they deserve are completely invaluable.