According to a recent FNBO survey, 49% of Americans are living paycheck to paycheck.
The survey also revealed that 53% of Americans do not have three months of expenses saved in case of emergency.
On the bright side, 91% of the folks surveyed said better money habits was a goal for this year.
If you are part of that 91%, here are 6 simple steps you can take to start overcoming your financial problems today.
Understand Your Why
When we want to save money without a specific goal, funds originally placed in a savings account have a way of magically being transferred back to a checking account within a couple of days.
When we want to save money with an end goal, say to purchase a house, a ‘new’ car, or to hit a three month emergency fund target, we become super savers.
It’s not that you can’t save money and make good financial decisions. It’s that you need a reason to do so effectively.
First, ask yourself why you feel the desire to change your finances.
- Is it because the financial stress causes you and your spouse to fight about money?
- Is it because you’d like to be a stay at home parent?
- Is it because you want to leave an inheritance to your children?
List the pros and cons that are pushing you to change your finances. From there you ask yourself what would happen if you kept doing what you’re doing currently.
- Will you lose your house?
- Will your marriage fall apart?
- Will you be able to retire when you want to?
In order to overcome your financial problems, you have to look at those problems head on.
These two questions will show you if your actions are lining up with what you want out of life. They’ll also serve as a reminder of ‘why’ you’re doing what you’re doing when you face tough financial decisions.
Organize Your Financial Life
Are you in debt? Do you even know?
Pull your credit report to see exactly what you owe and to who you owe it to. Before you decide on the debt snowball or the debt avalanche debt payment plan, figure out which bills you’re behind on and how far behind you are.
Then commit to keeping your bills in one simple place in your house.
I recommend putting the due dates on the calendar app on your phone to keep you aware of what’s due and when it’s due at all times.
Even something as simple as organizing all of the banking and finance apps on your phone into one folder on your home screen can help you by just providing a single location.
You should also sit down and list out a few financial goals you have and put them in a place where you will see them regularly.
Take the time this week to get things organized because it’s going to help you as you continue to work to overcome your financial problems.
Calculate Your Net Worth
Your net worth is the value of what you own, minus any debt that you owe.
Net worth is the financial metric that will reveal how well or how poorly you’re doing financially.
I recommend taking the necessary steps to calculate your net worth and doing monthly.
This is an easy step because there are apps like Personal Capital and Mint that will digitally calculate this for you.
There’s also a net worth calculator on my website.
All you have to do is log in and check it once every month.
Create A Budget
Pull your bank statement from last month, maybe even the last two months.
Go through all of your transactions and categorize them for the most accurate view of how you are spending money.
Once everything is categorized, think back to your why and your goals and ask yourself if how you’re spending your money is moving you closer to those things or further away.
From there it’s time to create a plan around those goals and your why.
Start by listing out all of your expected income. You can do this on a sheet of paper or you can get an app like EveryDollar.
Once you have your income down, list your expenses. I would start with the big three expenses:
- Housing
- Food
- Auto
List out the minimum monthly totals for everything related to those three things like utility bills, car insurance, gas, etc.
Once you see what’s left, you can start focusing on other areas.
In the beginning of planning, we focus on our needs.
Once you’re done with that, use whatever’s left to take care of your top financial priorities, whether that is saving for your emergency fund, paying down debt, or getting caught up on bills.
Remember, a spending plan isn’t there to restrict you, it is there to make sure that you’re spending according to your goals and your why.
Schedule A Monthly Checkup
It’s not enough to set goals and create a spending plan. You have to commit to following the plan.
One way to ensure that you’re following your plan is to have what I call a money checkup.
Set a regular time on your calendar to review the progress that you’ve made towards your goals.
You can use this time to track how much debt you’ve paid off, how much your net worth has grown, what wins you’ve had, and even where you’ve struggled.
You will also need to verify that all of the transactions are accounted for in your spending plan.
If you’re new to this, I recommend doing this every pay period so you don’t either fall behind or become overwhelmed. As you find yourself getting more comfortable, you can move to a monthly checkup.
In my household, we sit down on the fourth Sunday of the month and talk about what we did well that month. We talk about where we struggled and how we can address those struggles in the next month. We review our spending plan and we finalize it.
The whole thing takes less than 30 minutes and the purpose is to keep us aligned as a couple, and to keep us aware of our strengths and our weaknesses so that we can keep improving every month.
Invest In Yourself
You should always be investing in yourself.
As a collective, we spend unreal amounts of time on social media, binging netflix, or listening to serial killer podcasts.
I’m not here to condemn you for any of that; however, if you’re having financial problems, you should be spending some time investing in yourself.
Listening to this podcast is a great start! You’re spending valuable time learning how to be a better manager of your money.
It doesn’t have to cost an arm and a leg to invest in yourself.
Take advantage of your local library and check out books on different topics that can help you grow personally and career-wise.
Listen to media that aligns with your goal and your why.
You can even take low-cost courses.
I’ve been through several courses online that helped me develop new skills that increased my income from a side hustle or made me better at my career in sales.
Have any of these steps helped you overcome financial problems? Let me know by emailing me today at [email protected].
You can also find me on Instagram, Facebook, and Pinterest.
