I’ll be honest: my skills in the area of personal finance were terrible until I was about 25 years old.
I’m not ashamed to admit that I learned best practices by failing and then learning from my mistakes.
But see that’s the beauty of personal finance: it’s never too late to start turning things around.
Just over the last 4 years, we’ve gone from living paycheck to paycheck to having a 6 figure net worth.
How? By learning as much as I possibly could about how to handle money… and now it’s my turn to share some of my most valuable lessons with you.
Spend Less Than You Earn
It sounds like such a simple thing, right? But so many people live their entire lives knee-deep in debt.
There was even a time where we were over $61,000 in debt ourselves.
If you want to have more money than most of the people you know, you will always spend less than you earn.
Don’t buy into the belief that simply earning more money will fix all of your financial problems if you won’t commit to spending less than you make because at every new income level, there will always be a better car, nicer jewelry, and, put simply, more stuff that you just don’t need.
Live On A Monthly Budget
So how do you consistently live on less than you make?
The answer is actually very simple: create a budget every month and live by it.
Budgets aren’t some anti-fun spreadsheet designed to suck all the fun out of your life.
In fact, it’s the opposite. A budget done right will give you freedom to spend money on whatever you want without going broke.
It has to be specific to each month because every month is different.
For example, a budget in May would have an amount for Mother’s Day while a budget in August may have a line for back to school shopping.
Two different months with totally different needs.
And that’s exactly why you create a different budget every month.
Set Big Goals And Review Them Often
Aim High! Like think big then think even bigger than that.
Currently, we have goals to retire in by 45 years old.
We don’t make major financial decisions without asking whether or not that decision will move us closer to or further away from our goals.
Do we sometime get off track? Definitely. However, those times are few and far between and not big enough to knock us too far off track.
Big goals make daily financial decisions that much easier.
Always Have An Emergency Fund
One of my favorite rap lyrics is from the song “Ms Jackson” by Outkast.
It goes “you can plan a pretty picnic, but you can’t predict the weather.”
I love it because it’s so true. Yes we have big goals to retire earlier than most of the people we know.
But that doesn’t mean stuff isn’t going to happen that will knock us completely off track financially.
Something bad is going to happen. That’s not me being negative…that’s just life.
The best thing you can do is stay prepared with an emergency fund.
In our Winning To Wealth program, we teach people to have 1 month of necessary expenses saved while paying off debt.
Once you’re consumer debt-free (everything except the mortgage), we teach you to have between 6-9 months of expenses saved.
We keep our emergency fund in a Money Market account that has one of the highest interest rates out right now. You can check it out for yourself here.
You may lose your job, get sick, or something else devastating. Don’t make it worse by not being somewhat prepared financially.
Plan For The Future Sooner Rather Than Later
Time is of the essence when it comes to investing for retirement. The sooner you start, the better you’ll be.
You can thank compound interest for that.
That doesn’t mean if you’re late to the party, you can’t dance.
But I want my 38 year old self to look back and be thankful for all of the hard word and sacrifices my 28 year old self made.
Why? Because my current 28 year old self thinks my 18 year old self was an idiot when it came to money (He’s right) and I don’t want to have that same feeling 10 years from now.
Pay Off Debt From Smallest Balance To Largest
A recent study from the Harvard Business Review found that you are much more likely to continue paying off debt if you start with the smallest balance instead of the highest interest rate.
But wait…doesn’t paying off the highest interest rate save more money? Possibly.
However, the debt payoff game is all about one thing: MOMENTUM!
You’ve probably been in debt for years now. How would it feel to just knock one of those credit cards out?
Awesome, right? Exactly! I want you to feel awesome quickly so that you WANT to knock the next one out too.
This method of starting with the smallest balance is called the debt snowball and is exactly what we used to pay off $61,000 in 16 months.
Always Know What You Really Make
I know what you’re thinking. Well I make $18/hour or I make $55,000 per year.
But do you really?
Have you calculated what you make after taxes? What about the cost of commuting? Or those business professional clothes that you have to wear to work every day?
Do you work outside of normal business hours by attending trade shows and meeting clients?
Now I don’t want you to start hating your job. But I want you to see just how quickly that $18/hour can really be $10/hour and how you have to be mindful about your spending.
Is that $80 pair of shoes really worth an entire 8 hour work day to you?
Never Be Afraid To Ask For A Raise
This goes back to knowing what your work is worth. Sites like Glassdoor and CareerBliss can not only show you what other people in your position are making, but if you work for a large company, you can even see what others at your company are bringing home.
Knowing the going rate for your position will give you a good starting place once the negotiations begin.
You’ll want to bring up the topic of a raise casually a few months before any annual reviews so that your leadership team already knows you’re thinking about a raise.
Also, keep it professional. Don’t make demands, but, rather, demonstrate how you’ve gone above and beyond your job description to add value to the organization by mentioning concrete examples.
Finally, be open to hearing the word no. If that happens, ask when you can discuss the idea of a raise again and if there is anything you can improve on between now and then.
Create Multiple Sources of Income
One of the worst things to ever happen to me financially was losing my job right as we really hit our stride paying off debt.
It was unexpected and I had no additional income at the time.
Now, I work full-time, serve as a financial coach, and run this blog. All of which I make money doing.
In the future, I’ll get involved with real estate and even more things so that I’m not dependent on a single source of income at any time.
Do you have a side hustle? Share it in the comments below.
Always Have A Meal Plan
In another post, I shared how we went from spending over $1,000 per month on food to now spending less than 1/3 of that.
One of the keys to that type of turn around is creating a meal plan. Knowing what you need prevents you from buying what you don’t when it comes to grocery shopping.
If you’re super busy, you can check out some of my favorite sites like:
- $5 Meal Plan- They will send you a meal plan every single week with everything you need from the store. You can try it free for 2 whole weeks by clicking here.
- HelloFresh- I absolutely love their recipes and have not had a single bad experience with them. At the time of me writing this, you can get $40 off your first order by clicking here.
Ignore What The Joneses Are Doing
Your friend goes on vacation and you start googling vacation destinations.
Your neighbor gets a new car and suddenly yours looks a little older.
Your old college roommate bought a house and even though you haven’t been saving for a down payment, your apartment starts to get smaller by the minute.
Trying to keep up with the Joneses will always keep you broke.
Why? Because the Joneses are broke!
Almost 8 out of 10 households are living paycheck to paycheck regardless of their income and we’re all trying to copy one another.
It’s like a race to see who can be the most broke person in the neighborhood for the longest.
Ignore what everyone else is doing and focus on your own personal goals.
Stay Away From Brand New Cars
Brand new cars are probably the worst purchase you can make.
Not only will the car payment eat away at your income (which is your greatest wealth-building tool), but the car loses value at almost the exact moment you sign the paperwork.
Within 3 years, that purchase will be worth pretty close to half of the original sticker price.
Now if stocks, real estate, or any other investments lost value that fast we would never buy them.
So why do we buy new cars knowing we’re essentially tossing hard earned money out the window?
This final one is my favorite. Now I wasn’t always a giver.
Or maybe I was and just didn’t have the resources to until recently.
Either way, over the last few years I have found so much joy in being able to help meet the needs of others as they arise.
My sincere hope is that more people will experience true financial freedom not for the sake of just having money, but to be able to experience how great of a tool money can be when we give some of it away.
There are so many financial rules that I could share with you, however, the goal of this post was to just give you a few that you could implement quickly and see almost immediate results.
If you’re struggling financially and would like to talk through your situation, I’m always available for a quick, 30-minute call at no cost to you.
Book your time slot by clicking here.