So, let me guess, you’ve been looking at your finances lately and aren’t getting a warm and fuzzy feeling? You feel like everyone around you is moving at a lightening speed, eliminating debt and building wealth? Of course you feel this way. Social media makes it so. Seeing your friends posting their picture-perfect family on vacation in Hawaii makes you think they must be financial geniuses. And here you sit wondering how you’re going to pay for your kid’s braces next month. Trust me, you can be a financial genius, too. You just need to start. Here are 13 easy tips to take control of your money starting today!
13 Easy Tips To Take Control Of Your Money
Before you throw in the towel and give up on getting out of debt and getting on the right track with your money, just remember that social media isn’t real. Your friends only show you what they want you to see. And, vice versa. On a personal note, my husband and I had a very bumpy start with our adult finances. Read about all the jobs and all the mistakes we made before making the decision to take control of our money. Believe me, it’s not as scary as you think it is. Money is just…money. And you don’t have to be a genius to build a significant nest egg for yourself and your family.
1. Stop Being Afraid Of Money
First of all, stop it! There is absolutely nothing to be afraid of when it comes to your cash. Money is nothing more than a means to an end. But, you do need to make sure you’re ruling your money, instead of the other way around. Start changing your attitude to “I Got This!” instead of “I don’t know what the heck I’m doing.” Your attitude has the ability to change your response to stimuli. Start thinking about money as a positive thing, and you’ll find the anxiety starts to melt away. When the anxiety is gone, you’re ready to take control of your money.
Action: Change your thoughts and your attitude towards money will dramatically improve.
2. Communicate With Your Family
As with most things in life, communication is key. Just think of how many arguments or “cold wars” could be avoided just by taking the necessary steps to express and address concerns appropriately. So the next time you feel like yelling or stomping your feet, think about what will be accomplished by such an act? Will it help the situation or solve the issue? Chances are the answer is a big fat NO.
Let me just tell you, when it comes to money, communication is paramount. If I’m not mistaken, financial problems are still one of the number one reasons couples split up or divorce. You want to be a statistic, but you want to be the good kind of statistic!
Action: Make a date with the people who matter most to you. I suggest somewhere away from the stress at home. Act like you’re on a date – the topic is just going to be money. Yay. Talk about everything from what you want in the near future to what type of island you’re going to buy when you’re filthy rich!
3. Know Your Numbers
Before you can even begin to take control of your money, you have to first know how much money you earn and how much is slipping through your fingers. You’d be surprised how many people don’t know how much they make or how much they’re really paying out for their super quadruple HDTV all-in-one package.
Action: Write everything down in two columns. Column one will be for all monies coming in each month and column two will be for all monies going out each month. Next, write down the value of all your assets and the balance on all your liabilities.
4. Figure Out Your Net Worth
I cannot stress enough how important it is to know your net worth. Sadly, we only starting keeping track of our own net worth in the past few years. Net worth gives you a snapshot of how you’re doing. It’s a simple little calculation that even a 1st-grader can do. Keeping a pulse on your net worth lets you know if you’re trending in the right direction. There will always be ups and downs when it comes to real estate and the stock market, but if you’re gradually climbing, you’re on the right track! FYI, the chart to the right does not bode well for the financial future of a lot of people. You need to aim for higher numbers if you want to be comfortable in the future. So the next time you’re worried that your Facebook friends are way ahead of you, think about this chart, and think again.
Net worth Calculation:
Total Assets – Total Liabilities
Action: Look at the numbers you gathered for your assets and your liabilities earlier in this exercise. Now, simply plug them into the equation above and, voila, you have your net worth. You can easily keep track of your net worth with tools available at Personal Capital. I personally use PC to track our family’s net worth.
5. Write Down Your Goals
Now that you have your current financial landscape staring you down, it’s time to get organized. Next up, you need to write down your short-term and long-term goals. Make sure you’re on the same page if you have a partner or family. This will be crucial in meeting those goals.
Action: Sit down and make concrete objectives and goals. For example, don’t say you want to pay off the car as soon as possible. Say you want to pay off the car in 8 months by paying an additional $300/month. Use the same strategy for all short-term and long-term goals.
6. Develop Your Wealth-Building Strategy
Figure out how you want to build wealth moving forward. There are many ways to build wealth and there definitely is not a one-size-fits-all approach. There are rental properties for those who like to see tangible assets. Index funds are attractive to those who don’t want to get their hands dirty (literally). And, there are entrepreneurial routes for those who like a challenge and the idea of creating something from nothing.
Action: Decide the best strategy for you or your family and start taking steps in the right direction, even if that means just paying off the car first!
7. Examine All Expenses
Look at all of the expenses you listed in the beginning of this process. Now, examine what needs to stay and what can go.
Action: Make a decision as to what is a necessary line item in the monthly budget and what is not. Perhaps that gym membership you don’t use can finally hit the road.
8. Cut Out Unnecessary Bills
This is an easy one. Make the calls (actual phone calls) to cut out all unnecessary bills. Now, delete them from your monthly budget and take the difference and apply it towards debt elimination or wealth accumulation. THAT is the name of this game!
9. Cut The Cable
I felt like this should have its own tip line. Cable is such a huge expense that can be eliminated within a few minutes. Simply call up your cable company and cancel. Then, enjoy the extra cash you just added to your bottom line. We did this very thing over a year ago and haven’t missed it at all!
Action: Just do it. And don’t stress, nothing is permanent. If you feel like you’re dying without cable, call up the company and add it again. You’re not a bad person if you like having cable. It’s all about what you value and how you are actively choosing to spend your money.
10. Start A Budget And Build An Emergency Fund
No-brainer here. My husband and I gave up on a super strategic monthly budget after we got our financial house in order, but that’s not to say we didn’t follow one in the beginning. In fact, I would say this is probably THE BEST thing you can do for your household finances. Make sure the first line item in your budget is an emergency fund. The amount will vary based on your starting point and expenses, but you need one. Period. We like Mint for monthly budgets. But anything works here, even pen and paper. The point is to just start.
Action: Develop a monthly budget that everyone can live with. Leave some wiggle room in each category until you get your financial ball rolling. You can tweak it to be more specific next month, and the next month, and so on.
11. Know Your Interest Rates
If you have anything that you are making payments on every month, you need to know how much interest you’re paying. Make sure you know these numbers, too. Ideally, you’ll want to pay debts down that have a higher interest rate first. However, there is another school of thought out there that suggests paying the bill with the lowest balance first. I’d say either way is fine as long as you’re making progress and as long as the higher interest rate stuff isn’t astronomical.
Action: Look at your statements or call the companies to get your current interest rates on all monthly obligations.
12. Negotiate Lower Interest Rates
If, by chance, you ARE paying astronomical interest rates on any of your liabilities, call and try to negotiate a lower rate. Oftentimes, if you’ve demonstrated a history of paying on time, the company will work with you to reduce your rate. The only trick is, you have to ask.
Action: Know your numbers and call the companies to negotiate if you’re paying high interest rates.
13. Eliminate Debt & Build Wealth
And there you have it, the only thing left to do is to start working your plan! It might not be fast at first, and that’s okay. Progress can be made in tiny steps. Taking the first step is the only thing you need to do.
Action: Congratulate yourself on taking the first step towards taking control of your money!
What would you add to this list for someone just starting out? Have you ever been in a position of financial fear?
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