We all have some dream of what we would like our financial future to look like: the big house on the beach, the fast car, the commas in the savings account, the investment portfolio, the cool toys, nice clothes, long vacations. These may be the goals we have for our lives but like anything that is wanted for the future, it takes careful planning and hard work to achieve those goals.
Getting Started.
1. You can't ever be in control of your finances if you don't know what you make and what you spend.
2. You must have a goal in mind to achieve financial success. (Notice the word success is used here instead of wealth or prosperity, etc. Some people may only ever desire to live 1 day ahead of their bills, while others shutter of that thought of not having a 24 month cushion.)
3. Start with the information you already know.
Steps.
1. For one whole month collect all of your receipts, and write in a journal all of your cash transactions that do not have a paper trail (vending machines, lending to friends, cash tips, 7-Eleven snacks, etc.)
2. For that same month track how much money you make. Pay stubs, cash tips, gifts from friends, etc.
3. Make a list of all your fixed bills. Rent, Phone, Internet, Utilities, Insurance, Car Payment, Gas, Groceries, Loan payments, and any other bills that must be paid every month.
At the end of that month sit down and look at how much money you made first. Then deduct all of your fixed bills. This leaves your discretionary funds. This money is what you get to decide what you will do with. Will you eat out, go to movies, put some in savings, fix your car, buy new clothes, give some away, spoil your friends. This is the only part of your monthly income that you can change every month and have total control over. Most financial success is based on balancing your fixed bills, with the discretionary spending you would like to have. If you want to have more money to spend on your wants, then you will have to lower your fixed bills (rent, utilities, gas, car payment) or increase your income.
4. Categorize all of your spending for the first month you kept receipts. ex.
Rent - $800
Utilities - $163
Auto - $89.50
Gas - $247.51
Car insurance - $93.47
Groceries - $121.14
Dining Out - $84.50
Entertainment - $47.12
Fitness - $30
Clothing - $41.37
Medical - $45.00
Education - $73.00
Misc. - $ 160.20
Total - $1995.81
5. Determine how much money is left over at the end of the month from you
total income-total expenses. Some, None, or < None.
6. Then the hard part. Decide if you like the final outcome of Some, None, or < None.
7. Make the choice to make changes the next month that will help you reach you goal. Some of the questions that you should ask yourself might include...
a. Do I really need to live in this $800 apartment or could I find a $650 one that would suit my needs across town?
b. Do I really need the $120 cable package, or could I survive on broadcast TV and internet streams?
c. Is the car I currently drive what I need? Would I be better off getting something more fuel efficient even if i have to give up cool points, or some space?
d. Should I really be eating out so much? Do I need to go to the movies every week?
e. Could I make smarter choices about the groceries I buy?
f. Could I set my A/C thermostat on temperatures that use less energy, 79 instead of 74 in the summer?
8. Make the commitment to your goal and figure out a way to achieve it. Is it the envelope system? where you cash you paycheck and put the money straight into the envelopes for each category and when the money is run out so is your spending for that category? Or maybe cash is your problem and you need to stop carrying cash because you nickel and dime yourself into the poor house?
