Take control of your money instead of letting your money control you
It is easy to talk about personal finance, but how do you take the talk from passive to active? Here are six steps to help you start your financially conscious lifestyle.
Step One: Financial Fire Drill
“Add up the absolutely minimum amount you need to survive the month,” says Donna Freedman of the blog Survive and Thrive.
Assessing your monthly expenses helps you make a distinction between monthly wants and needs. This amount does not include luxuries such as cable, entertainment and eating out.
Step Two: Create a Budget
Budgeting means assessing how much you need to spend on monthly expenses such as rent/mortgage, car, child or pet care and groceries, and establishing a place for money left over.
“You have to really look at how much you have, your earnings and how much you can afford,” says Karrie Truman, creator of Happy Money Saver blog.
Groceries can be a big budget breaker, says Karrie.
“Often times, food is the No. 1 huge budget breaker because everyone is on the go and coming home tired around dinner time,” she says.
Instead of ordering a pizza or going out for dinner, this mom of four encourages people to coupon to help with the expense and prepare freezer meals for easy dinners at the end of the day.
Step Three: Cut the Fat
Once you have established a budget, address the monthly luxuries you could do without.
“Cut everything that you don’t need and can live without,” says Justin Cupler, assistant editor of The Penny Hoarder. “If you have a Netflix account, but only watch once a month, or have a car you’re paying on, but only drive two times a week, start cutting those expenses. You could save several hundred dollars a month.”
Step Four: Save
Whether it is a savings account, 401(k), IRA or mutual funds, everyone should be saving for the future. Saving every month can be as easy as “set it and forget it.”
“Automate your savings,” says Justin. “There is Acorns, Digit and multiple other apps that take money and stash it away for you.”
Acorns monitors your bank account and automatically invests the change from your daily purchases into an investment portfolio of your choice, from moderate to aggressive.
Digit connects to your checking account and analyzes your spending habits, bills and deposits. It then determines how much money you can afford to have transferred into a savings account every two to three days.
Both apps are federally insured and protected.
Step Five: Be Patient
Paying off debt and getting finances in order takes time.
“Time is the price to work your way up,” says Gina Pixler. “You’re not going to have it all together all at once.”
Gina says getting your credit score in good standing can take two to three years. By establishing clear goals to paying off debt, it can make you feel more accomplished.
“Break down the cost of debt into obtainable, smaller goals you can be proud of achieving,” says Gina.
Step Six: Reward Yourself
As you move toward your goal of living a more financially conscious lifestyle, save for events and vacations.
“It can be monster truck driving or the opera—whatever matters to you,” says Donna. “Go ahead and have it, but have a plan on how to pay for it.”
Gina urges people to make rewarding yourself a goal.
“As adults, we need to make vacation a goal and not work to death,” says Gina. “Reward with fun.”
When it comes to taking control of your money, it is an active process that should be given priority every month.
“Start now,” says Justin. “Don’t start next month. Start today.”