Where to begin…

“The journey of a thousand miles begins with one step.”

-Lao Tzu
Photo by Vlad Bagacian on Unsplash

We have been immersed in conditioned reactions, responses, and ways of thinking for a lifetime. There is a very powerful momentum within all of us to remain on our current trajectory, to maintain the status quo. Can this change simply because we decide one day that it is a good idea to do something different?  How can we reprogram ourselves when we find that what we were taught about money is not leading us down the path towards our goals? Most of us learned all we know about money from our parents.  At some point, usually in our teens, we all realized that our parents weren’t all-knowing beings, but just humans who tried to do their best with what they had.  The lessons they taught us about money management could be fundamentally flawed, and it is worth taking a fresh look at the subject.  In order to keep from stagnation, we have to be willing to constantly learn and grow, and reviewing topics like money can be a great project with instant rewards.

Think of your current state of household finances.  If you are like many households, it’s a mess. You can only “shut the door” and ignore the issue for so long.  It can feel overwhelming at first, but it is absolutely pivotal in putting you in a direct path with your ultimate goals in life.  There are so many tricky ways that companies wiggle in on your income like leaches, slowly siphoning off your lifeblood little by little.  Looking at where your income is bleeding away and patching things up will be like earning an instant raise or a bonus at work!  Credit card fees, bank fees, cell phone plans, cable bills, even drafty windows in the winter, can all drain your income without you ever noticing. 

Opening up your heart to learning about personal finance is a lot like visiting the carnival as a kid for the first time… with all of the chaos, rides, lights, smells, and vendors calling you to their games of chance.  It’s an overwhelming feeling and it seems as if you could never be able to understand how it all works! But, as you grow up, it all begins to seem smaller and you come to realize how it all comes together.  It is time to grow up about your financial health and see money for what it really is… a tool for you to use to get where you want to be in your life.  Hopefully, the information in this site will give you clarity and perspective for your finances.  There may not be a “right” way to manage your money, necessarily, but there is likely a better way than what you are doing now.  A look at the fundamentals may offer you a new attitude about money and how to use it as a tool for improving your life, instead of as a source of stress and frustration.

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Where are you in your ideas of money?  Are you a saver or a spender? Would you rather HAVE a million dollars, or SPEND a million dollars? Are you a credit card junkie? Regardless of how you FEEL about money, the structure still remains the same, but certain parts of the structure may make you a little uncomfortable. Knowing more about what makes you uncomfortable will improve your perspective.

At the core of being financially stable is always a budget.  Don’t run away screaming already!  This is a simple practice that you should try to make a habit of doing, and re-doing, a lot.   Maybe, once you have a handle on things, you can strive to work on your budget every month.  Some people need to look it over every week, every pay check, or less often.  It is a very simple math problem: Income – Expenses = Net Gain/Net Loss.  When you have a budget, written out and physically in front of you, you can see where your money goes and what you prioritize in your life. 

A quick Google search will find hundreds of different budget sheets.  Find one that you like and start filling it out right away.  Some are very detailed and some are simple. You need to see how much income you have, where your money is getting spent, and what you have left at the end of the month (or how far negative you are).   Start simple and see how it works for you.  (Excel spreadsheets will do the math for you in most cases.  This simplifies things so that you can try different numbers quickly to see how it effects your bottom line.) You can try this Microsoft template if it works for you.

List all of your normal expenses, but also make sure you list the ones that tend to hide themselves… Some habitual items that are often forgotten in your expense calculations could be:

  • Bank Overdraft fees
  • ATM Fees
  • Savings
  • Cigarettes
  • Alcohol
  • Entertainment
  • Tolls
  • Gifts
  • Convenience store purchases
  • Dinning out
  • Ice cream shop visits
  • Season ticket expenses
  • Car-wash costs
  • Normal auto repair/maintenance costs
  • Credit card late fees and interest (list cards individually)
  • Student loans
  • Books for classes
  • Participation fees (like craft shows or seminars)
  • Gym memberships
  • Magazine memberships

On the income side, remember to add any extras that come in to your household besides just your standard work income, for example:

  • Alimony
  • Child support
  • Monthly dividends
  • Side job income
  • Creative endeavors (like selling artwork or crafted items)

Once you have pulled together the bits of information and have them all in one place, you can begin to critique the way you are using your limited funds. Some say that your true focus in life can be seen by seeing where the money flows. If you see your funds are getting used for things that don’t better your life (like to credit card interest) and you can begin to work on funneling it towards things that are actually important to you.

Winning in the New Year

I don’t focus on what I’m up against. I focus on my goals and I try to ignore the rest.

– Venus Williams
Photo by Anton Darius | @theSollers on Unsplash

While New Year’s Resolutions are famous for being almost immediately broken, there are some simple things that you CAN stick with to get your financial world prepared and in order for the coming year.  Here is a quick checklist of three easy steps!  Set them up today so that you can get yourself on the path to your desired future!

  • Set up an automatic deposit to a High Yield savings account (try CapitalOne or SallieMae if you are looking for an online option, both offer decent interest rates and no minimum balances).  You can set it to automatically draw funds from your checking account on each payday so that your funds get transferred without any action required by you! (If you don’t have a checking account, please read here…. a checking account is a very basic need in the start of this process…). This is the easiest way to keep a resolution… remove your need to remember to do it!  Start small, with an amount you are comfortable trying, and set a reminder for yourself to review the amount and try to increase it each month.  This is your budding emergency fund, so HANDS OFF!
  • Work up a budget…. (I know, stop cringing… it is just a word!) You need a budget to really understand where your money is going. Many people are oblivious when it comes to how their paycheck is being spent. Maybe you are spending more on dining out than you expected? How can you know if you don’t have a baseline in the form of a budget.  There are so many good tools available to make this step so easy now!  (You can try Mint, which is free, or YNAB, which has a small monthly fee after a trial period.)  It is easier to start looking at your spending trends right at the beginning of the year. 
  • Set a few goals for yourself for the year.   Maybe it is finally killing that credit card balance so you can use those interest payments for your own needs. Maybe it is going back to school to invest in yourself, or paying off your student loans. (Try this debt payoff calculator to see how quickly you can get there.) Maybe it is to build some savings to use as a down payment on a house.  (Try this savings goal calculator.) Maybe it is to start investing in your future life goals (like owning a business) or saving for retirement.  There can be so many different goals, but if you do not set your mind to something specific, you will not be able to achieve it. 
Photo by Xan Griffin on Unsplash

Even though they seem like very simple basic steps, they can really set your mind clear on how you want to proceed into the New Year, what you are expecting out of it, and where you want to be when the year finally ends! Give yourself this chance to set a goal and feel proud of your achievement when you fulfill it!

Note: I have no affiliation or relationship with the service providers listed in this post, other than as a user or friend of a user of some of their services. These recommendations are for your research purposes only.