Managing your money is a challenge. At some point, most of us have struggled with debt, and getting on track financially means taking control. When you feel in control of your money, it’s a lot easier to make smart financial decisions. This is easier said than done. But if you break down the process into actionable steps, you’ll see that your goals are within reach.
If you are avoiding working on your finances, then you need to pull yourself together. It’s time to stop scraping by and get your financial life together. Whether we like it or not, money has the power to influence our lives. A properly managed balance sheet can lead to lower stress levels.
Taking the time to sort through your finances is critical. Taking that first step towards understanding your finances can be scary. But the long-term effects are worthwhile. If you can change course now, then you have the opportunity to end up in a better financial position down the road.
Ask yourself “Why?”
Asking yourself why you want to improve your financial habits is a big first step in learning to manage your money. If you aimlessly work to get your finances in order, you’ll eventually begin to wonder, “What’s the point?” From there, it’s all too easy to give up and return to bad financial habits.
So why do you want to get your financial life on track? It is easy to say that you want to start effectively managing your finances. It is an entirely different thing to follow through on that intention. Maybe you want to quit a stressful job and move on to something else. Or you may want to support your family. Maybe you just want to save for an awesome trip.
I’m not going to lie, getting a handle on your finances can be a time-consuming process. Yet, the time you put in can dramatically change your financial position for the better.
So, what makes your life worth living? Think about the people and goals in your life. Your answer will guide you, give you direction, and help you stick to the challenge.
Get clear on your numbers
You cannot move forward before you know where you stand. Take stock of your financial situation.
This is essential if you ever want to be financially healthy. You have to know how much money you’re actually working with. First, track your spending and your income. It is critical that your income is more than your expenses.
Sit down with a notebook or whip up an Excel spreadsheet. Write out exactly how much money you earn each month, and then list out all your bills.
Next, calculate your net worth by subtracting your liabilities from your assets. If you’ve found a positive number, congrats! If you’ve found a negative number, that just means you have a little bit more work to do.
No matter what you find, it is important to be brutally honest in this step. A bleak financial picture cannot improve if you ignore the problems. You want to stop scraping by and get your financial life together.
Decide what your financial goals are
After you’ve taken stock of your financial situation, it’s time to dream. Where do you want to be financially?
Before you start putting a few financial goals in place, start to ask yourself what your long-term and short-term goals are. What are some goals you want to achieve in three months from now? And what are the goals you want to achieve by December or even by this time next year?
The best part is that there is no right or wrong type of financial goal. You simply need to be honest with yourself about these goals.
Make a plan to become a financially responsible
Once you have a better understanding of where you stand financially, it is time to move forward. Take a look at your goals and set up a timeline for when you want to reach them. It’s okay to have an aggressive plan but remember that good things often take time.
Tackle your financial game plan one step at a time. Don’t let yourself get overwhelmed. You can dramatically improve your financial picture by following a simple plan.
Build a budget and stick to it
Your budget is simply your plan for how to make your money work for you. Review your essential expenses, your spending habits, and your financial goals. Calculate how much you can realistically put toward those goals after covering your basic living expenses.
Before drawing up your budget, review your spending habits from the past several months. Make an honest evaluation of your financial habits.
How much did you enjoy each purchase? Was it impulsive? What are you willing to cut back on to fund a greater goal? If you’re overspending or spending mindlessly, you’re ultimately taking away from your goals. Stop scraping by and get your financial life together.
2. Build an emergency fund
After you get your budget under control, the next step is to build an emergency fund.
Life happens. If you haven’t already run into a major financial emergency, then you likely will at some point. Emergencies can come in many forms. A major car repair. An unexpected medical expense, or a job loss can all lead to serious financial headaches.
Building an emergency fund can help to reduce the financial stress. You would rather focus on the problem at hand instead of wondering how you are going to pay for it.
3. Pay off your debt
Debt is a burden. There is no other way to put it. Whether you have student loans or mounting credit card debt, you’ll want to act on this fast.
These kinds of expenses make it hard to make any financial progress. So you want to nip them in the bud before anything else.
If you have debt, then make it a priority to eliminate it. Learn more about debt repayment strategies and how to get started.
14 Day Financial Detox Challenge
A financial detox is the process of giving your wallet some room to breathe. It’s pressing reset on your spending habits. And it’s being more intentional about how you view and relate to money
Invest in yourself
Investing your money into long-term investments is not enough. You should also invest in yourself.
Maybe you need to boost your personal finance knowledge through one of our many courses. Perhaps a graduate degree might be the best step to increase your earning potential. Do you have a business dream that you have wanted to make a reality? Make it happen through investments of energy and money!
Although there are many ways to invest in yourself, choose a path that will bring you the most happiness.
Financial adulting does not have to be difficult. You will need to make an effort to go through the steps. You want to stop scraping by and get your financial life together. That effort will translate into long-term financial well being.
If you want to wake up in a better place financially in 6 months, then you need to take action today.