One of the biggest problems with taking charge of one’s finances is the fact that a lot of people aren’t really sure what this phrase even implies. What are some of these financial processes, how many issues do you need to settle, how to prioritize when it comes to them and what kind of action one needs to take in order to get things in order? Only a few people have answers to these questions, and if you’re part of those who don’t, this article can help.
Naturally, in order to act in the right manner, you first need to learn a thing or two about the field, in general. It'll be easier for you to better manage and maximize your finances if you're educated on how the field works. With that in mind and without further ado, here are several tips you can use in order to learn more about various financial processes.
1. Learn the terminology
Regardless of what kind of financial actions you decide to take, the first step lies in learning the terminology of the field. This is the most basic step in understanding your financial processes because the information you can acquire here will give you an idea on how the financial industry works. This way, you can ask some questions, look up tips online or even google more efficiently.
The terminology that you’ll face mostly depends on your field of interest, however, there are some general finance terms and definitions that you need to get acquainted with as soon as possible. We’re talking about terms like accounts payables, assets, cash flow, collateral, credit score, etc.
If this is your first attempt to better understand your financial processes, take the time to learn about common terminologies online. The Internet is a gold mine of information that can provide you with extensive knowledge on personal finances and the financial industry, in general.
2. Learn about your credit score
Your credit score is a number that you’re awarded based on your previous financial history. When examined, it determines your ability to get a loan (at least on favorable terms), to get a better premium on an insurance policy or even get employed in some fields. In other words, improving your credit score needs to become a top priority but, before you can do that, you need to A) learn how to check your credit score and B) understand how this score is calculated.
Most widely used system is the so-called FICO scale, which ranges from 300 to 850. You can find many platforms that can check your FICO score online. As for the factors that go into it the five most important ones are your bill payment history, level of debt, credit history age (the longer the better), types of credit on your report and a number of credit inquiries (the more frequently you check the worse it gets).
Once you found out that you have a bad credit score, work on improving it. Your credit score can affect many facets of your life, and having a bad credit score can disqualify you from getting a job or leasing a home.
If you don’t want any of these to happen, improve your credit score by doing the following:
- Pay bills on time: Paying your bills on time is one of the easiest ways to improve your credit score because your payment history significantly affects your credit score. Records of late payments will stay on your credit reports for seven years, and can snowball into bigger financial problems in the future. For you to pay your bills on time, be smart about your budget and know which expenses to prioritize. Ticking off unnecessary expenses from your budget will also help you save more money, which you can use for your bills payment.
- Pay off debt: It’s common for people to acquire debt during financial emergencies, but if you have many, it’s important to gradually pay them off. The amount of debt under your name represents 30% of your overall credit, which means that having large amounts of debts can adversely affect your credit score.
- Get professional help: If all else fails, ask help from a financial advisor. They have years of experience in the industry, and can provide effective tips on how you can improve your credit score and ensure that you have a good credit record throughout your lifetime.
3. Transparent banking processes
Provided that you’re running a company, you’ll have so many financial processes going through your accounts that keeping track of them might become a major difficulty. Other than this, there will be a lot of parties interested in these processes (at least those parts that affect them) but sharing this information isn’t always simple, safe or trustworthy. Fortunately, nowadays, there are numerous, reliable open banking solutions out there that can help keep everyone safe and well-informed about all of these processes. Asking and providing detailed reports is always the way to go.
4. Ask questions in all the right places
Another thing you need to understand is the fact that you can’t find all the answers that you’re looking for online or even in textbooks. Some people undergo years of education and training in order to become financial advisors, tax accountants and managers. So, the best course of action would be to consult a financial wealth advisor one of these experts about your financial processes and see what you’re doing right or wrong. By simply asking the right question to the right person, you can see a drastic improvement in this field.
5. Enlist on a course
Instead of doing independent research, why not find suitable courses in fields that you’re interested in and enlist. Nowadays, in the era of online courses and downloadable learning materials, you’re much better off getting the education you need, without having to sacrifice too much of your time to acquire it. This is particularly important for those who already have a day job and can’t find time to attend courses in person.
As you can see, these aren’t actionable tips but rather hints on how one can improve their knowledge on this topic. With these five mechanisms, the learning process itself will become much simpler to grasp and much more effective.