How to quickly get your finances sorted so you can control your money and live your dream sooner than expected!
Photo courtesy of MoPocket.com
Seven years ago an unexpected and undesired event helped me (it didn’t feel like help at the time, but it was!) move across the country, sell a house in which I, the seller, was the one who had to bring the check, take a new job at forty percent less than my old salary, and all this with almost $20,000 in credit card debt.
Today I have ZERO debt and more in savings than I had when I earned much more money. I am more fulfilled at my job and am living a lifelong dream, having moved to France two years ago!
The upheaval forced me to take an honest look at myself and make proactive changes. I fasted financially in order to be able to feast now, and I know that you can, too!
Here are some of the ways, both conventional and out-of-the-box, that I took control of my financial life:
Write your money a no-holds-barred letter.
Start a letter “Dear Money.” Then write without stopping for fifteen minutes. Don’t worry, no one else will see it. This may seem silly or uncomfortable, but it works. The purpose is to help you to understand your relationship with money and your beliefs about its place in your life. By writing without thinking first, you will clarify obstacles and conflicts that have impeded your financial freedom and then be able to take concrete steps to overcome them. Until you know why you can’t save a dollar, for example, or are afraid to invest in the market, you can’t take action to stop it.
Find financial mentors.
Most of us have never learned how to manage money. Like anything else, it helps to have an expert opinion and a guide on your new path. Go online or to the financial section of a bookstore and let someone capture your attention. I love Glinda Bridgforth and Suze Orman. Bookmark financial sites that you can look at daily or sign up to receive their email newsletters. Read everything you can about whatever you need to learn, whether it be budgeting, how interest rates work or prospecting on the stock market. Do this on a regular basis and it will maintain your focus and build your expertise.
You might also consider finding a friend or a relative with whom you can share information and be accountable to. Choose someone who will be nonjudgmental and is willing to ask you difficult questions. This needs to be a person with whom you can be totally honest. Meet with them once a month so they can check your progress and make sure that you are staying on track.
Pay as much as you can to your highest debt first.
Which of your debts has the biggest interest rate? That’s what you pay off first. Pay the minimum amount to everything else, including your savings! (Think about it: your bank pays you about 1% interest on your money, and your debtor is probably charging you at least 10%, so saving instead of paying actually COSTS you money.) When the first one is paid, go to the next highest and so on until you’ve paid it all off. After you’ve come up with your list of expenditures and your plan (see below), you can figure out the maximum amount you can pay to this debt each month. Put every single possible extra dollar to this debt – this is the quickest and most effective way to see a change.
Automate everything you can!
If you’ve ever been on a diet, you know it helps to completely take willpower out of the equation. Set up payments and savings so that you don’t have to even think about it. It’s like having a personal coach who hides the cookies where you can’t find them. Online bill payment through your bank or the company itself is almost always free (if it’s not, don’t do it, find a different bank). Take a few minutes to automate every possible thing, including direct deposit of your paycheck. This includes retirement contributions, credit card, utilities and mortgage payments, etcetera. Set up the withdrawals as close as possible to the day your paycheck is deposited.
Nickel and dime yourself.
This is the time to be brutally honest. You’ve already started by writing yourself a letter, now continue by truthfully and objectively figuring out every single cent you spend. Make a spreadsheet of a budget, models of which are available online, or even jot it down in a notebook, just keep track somewhere consistently. Write down absolutely everything you spend your money on for one month. This includes credit cards, utilities and insurance, but also groceries, magazines, haircuts or Mc Donald’s on Friday nights. This will give you a pretty accurate picture of your average expenses. From here you can decide what you need to stop, increase, change or edit and what you can live without temporarily. Don’t forget to make a list of all your debts and then put them in order from highest to lowest interest rate.
Photo Courtesy of Food For the Soul (U.S.)
Literally freeze your credit cards.
Save one for emergencies (REAL ones!) and hide the others, frozen, as far back in the freezer as you can, preferably out of sight (out of mind!) If you’re tempted to buy those great-looking shoes, by the time the card dries out, you may have calmed down and reconsidered that impulse purchase!
Photo Courtesy of The Yerd
Set goals with achievable benchmarks.
Sit down with your letter, your budget and your expenses and take the time to make a plan with realistic and regular benchmarks. Write exactly what you want to have achieved in one year, and then break that into monthly tasks. (I use the 4-1-1 Form for everything in my life, available at the Productivity Warriors site.) If you want to pay off $10,000 by next March, for example, you know you need to make monthly payments of $833. If that’s not possible, rethink your goals so that you don’t get discouraged. If you can pay $400 a month, you will still be debt free in just one extra year, and that’s two years sooner than if you never made a plan! Put your goals somewhere where you can look at them every single day so that you are constantly reminded.
Set up an online savings account.
Don’t start saving as much as you can on a regular basis until your high-interest debts are paid off, but do start as soon as they are. Set up automatic monthly (or even weekly) transfers to a separate online savings account. The online account will be linked to your local bank account, shouldn’t cost a dime and allows easy transfers between the two. The benefit is that a transfer usually takes one or two business days, which is just enough time to stop thinking impulsively and really reflect on spending the money! I like Emigrant Direct but you can Google search and find one that fits you.
Use affirmations and visualizations.
Like the letter, this may seem weird at first, but it really works. If you believe that you will never get out of debt, you won’t. Repeat an affirmation as much as possible and post it where you look at it all the time. You can stop “poverty mentality,” that is, believing that you will always be in debt or poor, by saying the opposite until you believe that instead! You have power and control over your money. It’s just a matter of education and planning! Some affirmations I like are, “I spend money wisely” and “I am in control of my finances.”
Negotiation is even more effective in our present economic environment, and it works! Don’t be afraid to bargain, ask for a discount, reason or banter. With everyone, for everything! It never hurts to ask – the worst that will happen is a “no.”
Invest your savings.
Take that extra savings out of the bank and put it into the stock market. Warren Buffett isn’t rich because he kept his money in a savings account that earns a mere one-percent. It’s a proven fact that long term and steady investment in the stock market pays off more times than not. I don’t mean day trading and chasing trends! It’s worth the very small commission of a professional financial advisor who is an expert and who should maintain open communication with you at all times. This is another painless, automatic way to help your money grow. I highly recommend the advisors at Edward Jones.
ENJOY and live your dream!
Nothing happens overnight (it’s been seven years since I started this financial renaissance) but with patience, determination and hard work, you can make the changes you want!
Keep striving and let me know what has worked for you!
May your financial dreams become your reality.
This is not my normal “niche” subject for writing, but Darren Rowse at Pro Blogger has inspired me to branch out with his motivating Group Writing Project: Write a ‘How To…’ Post. Anyway, it’s because of what I wrote about here that I am able to travel, explore and adventure in France!
For more “How To” posts that are more “intimately” related to Babette, I invite you to read:
How To Survive French Bureaucracy in Five Steps
How To Disguise Yourself as French
And don’t forget to COMMENT BELOW! Thank you, merci beaucoup!