6 Ways You Can Change Your Finances in 6 Months, According to Nischa Shah
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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If you aren’t happy with your finances for any reason, you might be in the mood for a financial overhaul, whether this is to get better at budgeting, save more or simply organize your finances.
Former investment banker and chartered accountant Nischa Shah, who now offers financial advice on her social media channels, suggested in a recent video that she can help you change your finances entirely in just six months without having a six-figure salary.
It’s all about making your money work for you, she said.
Face Your Finances
Shah begins by asking if her viewers have heard of “the ostrich effect,” which she called “psychological bias where people actively avoid information that makes them uncomfortable — especially when it comes to money.”
To get your finances under control, you need to face them by calculating your “four core numbers,” which are:
- Net income: Your take-home pay after taxes
- Fundamental expenses: Rent, bills, food, transport
- Future you: Money allocated to savings and investments
- Fun spending: Leisure expenses
If it makes you uncomfortable, she promised that “knowledge is power” and recommended you use a budgeting app or spreadsheet to track expenses.
Build a 1-Month Emergency Fund
In month two, Shah tasked her viewers with saving up a one-month emergency fund that equals your total month’s “fundamental expenses.” This requires frugality and doing such things as cutting back on nonessentials like subscriptions, dining out and impulse buys.
More importantly, it requires a mindset shift, as humans are “wired for immediate gratification,” which can make saving feel like a loss. Instead, reframe it. “You’re not depriving yourself. You’re buying freedom,” she said.
Eliminate High-Interest Debt and Expand Your Emergency Fund
In month three, it’s time to start getting out of debt, with a priority in paying off “bad debt” first, such as credit cards and personal loans, which have higher interest rates. She recommended viewers pay off any debts with 8% or higher interest first.
Then, when debt is gone or manageable, now you prioritize building your emergency fund from one month’s worth to between three and six months’ worth of your fundamental expenses. She recommended you keep that fund in a high-yield savings account.
Start Investing
By month four, if you’ve followed her advice thus far, you should be ready to begin investing. Her investing tips are simple:
- Max out employer benefits: Take advantage of company retirement plans.
- Open a tax-advantaged account like a Roth IRA, stocks & shares ISA.
- Invest in broad market index funds and ETFs.
- Balance investing and emergency fund growth. Start with 70% savings and 30% investments, then shift to full investing after reaching savings goals.
Increase Your Income
In month five, it’s time to look for ways to increase your income through one or more opportunities. From looking to negotiate a higher raise or finding a higher-paying job to adding in a side hustle, even adding as little as an extra $200 per month can help you increase your savings and investments quickly.
Automate and Optimize Finances
In the sixth month, you take the work out of all of this by automating as much of these processes as you can. Set up direct debits for bills and automatic transfers for savings and investments.
Then, make sure you have separate accounts for spending and “fun” money to make sure you don’t overspend.
Lastly, be sure to regularly review and adjust your plan as needed, checking that your savings and investments reflect your goals.
She concluded the video saying that financial freedom is actually less about discipline and more about setting up systems that work automatically.
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