In October I wrote about the fact that your finances need your attention and that Ignorance ≠ Bliss.
In November I wrote about setting aside time and energy to learn about your personal finances and the relevant financial information is an important step to give you more understanding and how Knowledge leads to Control.
Now, what do you need to feel powerful with your money? You need to get into action! Once you have the knowledge, Control + Action = Power. Here are my top 7 actions to start you in the right direction!
Think about your finances like driving a car. Without some sort of directions, like a map, and actions to move you in your chosen direction, like steering a car and stepping on the gas, you can waste years and a great deal of energy meandering aimlessly, and never reach your desired destination. This is true in most areas of life, but especially true with your finances.
“You will either tell your money what to do or the lack of it will always manage you.”
– Dave Ramsey
What do you need to start taking action? Here are my top 7 actions that will give you more power over your finances!
1. Make a Budget:
You must make your expenses and income sources both visible and easy to track in a simple budget. Include all of your cash spending as well as credit card and any monthly bills that are paid automatically. Every movement of money through your hands needs to be looked at and acknowledged. Yes, budgets have a reputation for being difficult and boring, but they really can be simple, very enlightening and a big source of feeling power over your destiny! There are lots of tools for this online. Find something that is simple that will work for you.
“A budget is telling your money where to go instead of wondering where it went.”
– Dave Ramsey
2. Balance your budget:
Managing your incoming and outgoing money to create a ‘balanced’ budget is critical for your peace of mind. A balanced budget means you can ‘live within your means’. If your income is more than your expenses, you can start putting the extra money towards savings. If your expenses are eating through your income and adding to your debt every month, it is critical that you start cutting your expenses or growing your income to eliminate your debt before it spirals out of control. Living with a balanced budget is critical so you can start deciding on YOUR priorities.
“Balance is not something you find. It is something you create.”
– Jana Kingsford
Balancing your money is the key to having enough.”
– Elizabeth Warren
3. Increase your Savings:
Decide on a reasonable percentage of your income to save every month. Take this money and place it somewhere safe, like a savings account or investment, to remove the temptation to spend it. Ten percent is what is normally recommended.
Use this method to build up some money in an emergency fund for unexpected costs that your budget won’t cover that are true necessities. This will help your stress levels when life throws unexpected expenses your way!
Decide on short-term and long-term goals like trips and retirement that you can work towards every month by watching your budget and putting aside extra money. Having a goal you are excited about will give you the motivation to save that little bit extra. Think of retirement as a nice long vacation too because we all need to save for that and thinking about your goals for this time in your life can be very motivating.
“Beware of little expenses. A small leak will sink a great ship.”
– Benjamin Franklin
“Do not save what is left after spending, but spend what is left after saving.”
– Warren Buffett
4. Decrease your debt:
When you must buy on credit, pay things off as soon as you can – monthly if at all possible! Paying high-interest fees and carrying costs can dramatically increase the money an item has cost you and be a big drain on your budget. Always pay off the most expensive debt first.
Do you really ‘need’ that item or is it is a ‘want’? Would it be nice to have but is actually unnecessary? Why are you buying it? If you had known it actually cost you twice as much after adding up the carrying charges and interest would you have still wanted to buy it? Would it be a good reward if you actually saved up over time for it or will it make you feel bad every time you open your closet and see that impulse buy that you have never used or worn?
Become aware of your impulse spending and minimize it. Make sure you actually like and need what you buy! Is it filling a true need, or does it just help with an emotional need temporarily?
If you really want something, plan for it and give yourself a waiting period before you buy it. I often think “I should buy that” and when I don’t allow myself the impulse I often return home and cannot even remember what the item even was that I almost bought!
Adding up what the items would have cost you can be motivating, because you can see what you actually saved by not buying something.
“You will win at money when you decide that your family’s future is more important than any new toy you want to buy.”
“Don’t give up what you want most for what you want now.”
– Dave Ramsey
5. Don’t compare or compete:
Everyone has different financial situations and strategies. Don’t worry about what anyone else is doing. Comparisons often lead to jealousy and may set you off on a bad path of spending to keep up with others. People may look like they have a fabulous life, but they may have tremendous debt and stress that you simply cannot see from your vantage point. Appearances can be very deceiving so work on your own finances, your own enjoyment of life and your own future! Focus on yourself and forget what your neighbours, friends, and family appear to be doing!
“We buy things we don’t need with money we don’t have to impress people we don’t like.”
– Dave Ramsey
6. Make plans and goals:
If you don’t set a goal or make some plans, let’s face the fact that you will not have any motivation to budget, save, and pay down debt. If you are reading this because you want to feel powerful and more in control, you must start by setting some goals. Set a goal; break the goal down into manageable, doable and measurable steps. The steps are your plan.
Follow your planned steps until you reach your goal. Revisit your goals periodically. You may need to adjust them and your plans as life happens and sends you off course. Be sure to celebrate your accomplishments as well!
“Something magical happens when you write down your goals. It changes the way you see your situation.”
– Dave Ramsey
7. Know your ‘WHY’:
Knowing ‘why’ you are setting financial goals is important too. Your ‘why’ is the reason you wanted to have knowledge and control over your finances in the first place.
Knowing your ‘why’ will keep you going when things get tough and you have a setback. Your goals may change or be reached but your ‘why’ will keep you setting new goals, rising to new heights, and going in the right direction.
It is important to remember your ‘why’ and share your ‘why’ if others are involved in your budget to prevent any sabotage! I often see one person working really hard, only to find out that their partner or children have drastically increased their debt load sometimes for years without their knowledge. If they do not know your ‘why’ and you are not working together on these things, sabotage is much more likely to happen. Sharing your ideas and the understanding and commitment to your goals with others creates better teamwork.
“When you and your spouse agree on spending, you’ve agreed on dreams, fears, goals and priorities.”
– Dave Ramsey
Back to my driving analogy:
Knowing why you want to get in the car (your why), having a destination (a goal), having a map on how to get there (a plan) and then getting in the car, moving forward and steering (taking action) to get to your financial destination is very satisfying.
Know that once you are behind the wheel (in control) you will also have the ability to change your route (your goals), slow down and enjoy the view (readjust your plan), and invite passengers along (create buy-in) for your lifelong financial journey.
Remember: knowledge gives you control over what you do have. Taking actions like balancing your budget, saving for your future, and reducing your debt will make you feel empowered and able to make good decisions now and for the rest of your life. Seize the opportunity to drive your own finances – get behind your steering wheel and get going!
Please contact me if you would like some help because I am a good navigator to have in the passenger seat and I can help motivate you to gain control over your finances. I can help set you up with the tools you need and keep you accountable until you feel empowered with your own money.
If you are going through a separation or divorce I can also help you sort out the overwhelming changes you are facing in all areas of your life – not just finance.
I do offer a free strategy session.
Take good care of yourself!
The Separation Project Coach.