In the last article I wrote, I discussed that getting into debt is the result of your personal choices. This is also true for financial freedom.
There is clearly only one way in which this endless cycle of having no money can be reversed, and that is to decide what you want.
If you choose to live a life where every month you have no money left, then keep making those choices. If, on the other hand, you have had enough of living like that, then make different choices and take control of your financial life and make it happen.
1.Start an immediate assessment of every dollar you bring in and spend every month
Do you rely on your 9 – 5 job? Do you have side jobs? Do you invest?
Whether you rely on a single income or make most of multiple income streams, it’s important that you assess how much dollar you make each month.
It doesn’t matter if you can make up to six figure income each month. What matters most is your ability to keep more of this amount consistently.
2. Keep receipts for everything you spend money on
If you think that receipts are just a piece of trash, then you’re wrong! Receipts can help you keep track of the things you’ve spent and help you assess if these expenses are worth every dollars
3. Write down for 30 days in a journal every dollar you spend and on what
Keep your finances in check by writing down a 30-day journal of all your daily expenses. This journal will give you idea if you will be able to meet your desired monthly budget or exceed.
4. At the end of the month, add up all that you spent and organize into categories (e.g. food, entertainment, etc) so you can see by each category how much you spend
Grouping your expenses by category will help you see right away how much you’re spending for each of this need. These expenses can divided to major categories: housing, living, transportation, debt, and savings. Those categories can be sub-divided, so you’ll be able to break down each expenses.
You’ll notice right off the bat if, for example, you’re spending a lot for entertainment or any money wasters. Maybe you’ve been subscribed to gym membership, but you can’t even drop by the gym. Maybe you’ve bought two expensive gadgets within the month. By having a list, you will realize if you’re spending or wasting a lot of money on “wants” and are skimping on more important things.
This will give you a conscious effort of ridding out money wasters and concentrating on things that will pay off in the long run.
5. Set budgets and live within your means. Use ratios as a guide for how much you should spend
You’ll experience improvements in your finances once you have the conviction that you will live within your means. This is why the importance of keeping a list of everything and sticking to a particular budget has been stressed all throughout.
Living within your means isn’t a no holds barred. It requires commitment that you will be responsible in terms of handling and spending money.
6. Set aside 10% to 15% of every dollar when it comes in and then live on the remainder
Truly wealthy people have fewer “wants” and they use money to work for them. You can never be wealthy if your spending habit has not been tamed.
A 10 to 15 percent of savings each month can go a long way especially if you are a parent with young adults to send off to universities.
There’s this 20-30-50 budgeting ratio which probably you haven’t heard of and should consider to kick-start your financial life:
- 20% should be saved for future expenses (e.g. emergency funds, retirement, education, or any goals you have in the future) and for paying debt
- 30% should be allocated on housing
- 50% should be spent on basic needs and all important stuff you need. This also means that you should limit your needs to 50 percent of your monthly income.
7. Write a 30 day, 90 day, 180 day and 365 day plan and goal for an amount you want to set aside reserves
Now ,once you’re closer to taming your spending habits, you can start aiming for monthly, quarterly, or yearly budget plan. Make sure to cover all the bases and see to it that these are all feasible and realistic budget plans.
8. Review your progress every week on a regular schedule and adjust if you are not meeting objectives
Any goals and efforts will be put into waste without tracking the progress either regularly or weekly. Monitoring your expenses and your efforts will help you see if you’re meeting the objectives or not. Don’t be satisfied, however, with just reviewing your progress. You must do a concrete action plan if your goal(s) or objective(s) are not being met.
9. Find a mentor or financial coach that will help you set up the tools to use
Some people already see themselves a failure or a “hopeless case” because, at some point, they are paying off debt that are beyond their means.
Whether you’re a hopeless case or just starting out, it pays off to find a mentor or financial coach to get you in the right financial track. We have professional financial planning and coaching program that will guide you through the very core of financial success. We have online courses, trainings, webinars, professional coaching, and a lot more.
10. Start paying off your debt ( either short-term or long-term)
Nobody wants to be buried in debt forever! You should aim to be debt-free and avoid any forms of debt again in the future. It’s never easy to pay off debt particularly if you got stuck and you have other important things to allocate your money. One of the hacks in paying off debt fast is to sort them from largest to smallest interest rates (or the ladder method) and go after the one with the highest interest first.
Nevertheless, a debt is still a DEBT. You can prevent this from taking over your financial life if you’ve been wiser and responsible enough in dealing with your finances.
I have coached many people over the years. Hundreds on the principles of these steps to begin the transformation of financial control and responsibility and in every case success was seen as early as 30 days in the significant turn-around each person made in their financial life. You can do this but may need a coach to help you organize the process, tools and steps to make it happen. Whatever you do, start today to bring financial order into your life and Make It Happen. Your future literally depends on it.