How Does Financial Management Work?

Managing your finances can sound like climbing a treacherous mountain. Investing, borrowing, and repaying balances all involve a solid understanding of the financial system and a commitment to creating constant improvement in your overall financial health. But managing your personal finances responsibly doesn’t actually have to be that hard. With some easy to implement tips, anyone can take control of their finances and begin to steer toward clearer waters.

Start with your debts.

Debts of all types are a major drain on your financial mobility. Too much debt can prevent you from successfully borrowing for a mortgage loan on the new house you have had your eye on, or stop you from going back to college for an advanced degree to improve upon your professional skills. The best practices for financial management include paying off debts, but repayment as a borrower is not the default setting, nor should it be. In truth, there are a number of great ways to reduce the burden of your debt without committing straight away to hefty repayments.

Consolidation of debt is a great place to start for those carrying high-interest credit card balances. Borrowing from a bank as a part of your mortgage loan funds, borrowing a loan specifically for debt consolidation, or even enrolling in a Master’s program to take advantage of the additional capital offered at a single-digit interest rate while improving yourself professionally are all great options.

Anything you can do to move debt from higher interest locations to a central, low-rate debt vehicle will create a unique peace of mind that can power your repayment strategy for the coming months or years. Consolidating debt gives you a single monthly repayment rather than those to the multiple financial institutions you currently pay. A single source of debt can typically give you a lower minimum payment each month, leaving you extra cash to either overpay or save for another expense.

Build a strong investment strategy to match.

The other side of the coin is in your investment strategy. If you don’t already invest, start now. Bank interest rates are absolutely abysmal. They might help you break even after accounting for inflation, but usually year after year, the savings you place in a bank account for growth yield a minimum rate that actually loses value in the grand scheme of things. This is not to say that bank savings accounts are a poor choice though, it’s just that other investments such as BNHLF stock have proven to be more profitable.

It’s essential to keep a cash savings account on hand in order to field emergencies that may arise at any moment. However the bulk of your savings should rest in the stock market, gold, real estate, or other commodity markets that yield an increased profit. Yieldstreet investments are the type of investments to be on the lookout for.

Placing your savings in a high yielding investment helps to cancel out some of the value you are losing with your debts. This is why alternative investing or purchasing commodities that can be leveraged as collateral is such a powerful addition to your portfolio of assets. Any good financial manager will tell you that retail investors need to offset the interest payments extracted by creditors in order to create real wealth generation. Rather than focusing on debt repayment or savings, you need to split your energy in order to tackle both at the same time. These two streams of financial focus operate on an inverse and exponential scale. Eventually your savings total will overtake the money you still owe and continue to skyrocket from there. At this point you could draw down the earned profit on your real estate or stock market assets and simply pay the remaining balance, or extract your monthly payments directly from your portfolio in order to create additional free cash in your wallet.

Financial management begins and ends with due diligence in both investments and debt reduction. Understanding the relationship between these competing interests is essential to creating financial freedom and wealth that will carry you through life.