Feeling as though your finances are completely out of control is a troubling, yet, all too common issue for many people. No matter where you look, it appears the vast majority of us are struggling in some way.
While some of us are suffering under the weight of ginormous car payments, others are trying desperately to pay off student loans while still having money to live. Meanwhile, an entirely different demographic is just sucking with money in general by living a lifestyle they cannot afford. For the record, I know people in all of those categories. And, unfortunately, most people whose finances are out of control aren’t doing what is required to turn things around.
5 Steps to Get Your Finances Under Control
If you’re in the minority and actually want to make a change, here are some steps you can take to dig your way out.
Learn to live within your means.
In simple terms, you should not spend more money than you earn. While that may sound like a crazy concept here in good ol’ America, living within your means is the best way to avoid debt and live a financially comfortable lifestyle. To figure out what your “means” is, you need to figure out how much you bring home after taxes every month. Then, simply subtract your basic monthly bills and expenses. What’s leftover is what you can afford to save, and if nothing is leftover than you are living above your means already.
Track your spending.
As I have mentioned many, many times, tracking your spending is the key to making a permanent change. It pays to be horrified by your own financial waste, but the only way you can confront it is to track your spending and see for yourself. To track your spending, break out the last few month’s bank statements and tally up the totals in all of your main categories. For example, see how much you’re spending on cable television, entertainment, dining out and groceries. What you discover might shock you.
Create a monthly budget.
As you probably know, I’m a zero-sum budget enthusiast. Zero-sum budgeting is a type of budget that uses last month’s income for the following month, and requires you to pay savings and debts as if they were bills. While you don’t have to use a zero-sum budget necessarily, a budget of some kind is extremely helpful to almost anyone. Even though many people cringe at the thought of living under the rule of the dreaded “B-word,” budgets are actually a valuable tool. Instead of thinking of it in a negative way, think of your monthly budget as a method that helps you get what you really want out of life. Because, when you’re budgeting in order to waste less and save more, you’ll have more money for the things you really want.
Build an emergency fund.
Can you really afford an expensive emergency? If you don’t have an emergency fund, then the answer is probably “no.” Even worse, not having an emergency fund is one of the most common ways people wind up with a huge mountain of debt. Because, when a financial disaster such as a job loss, major home repair, or unexpected illness or medical condition strikes, people are forced to use credit to keep the lives afloat. With an adequate emergency fund, on the other hand, you’ll be prepared.
Find ways to earn more money.
No matter who you are and where you live, there are ways to earn more money. While most of them won’t be ideal, you do what you have to do, right? Some ways to earn more money can include:
- Freelance writing. Learn how to get freelance writing jobs and complete them from the comfort of your own home.
- Become a virtual assistant. Use online sites like Elance.com to find easy work-at-home jobs you can do on the computer.
- Take surveys. Sites like UserTesting.com let you earn money taking surveys online while you watch TV..
- Give plasma. When Greg and I went to give plasma several years ago, they were offering $80 for first donations.
- Sell stuff you no longer need. While I once sold a lot of our old stuff on Craigslist, I now use our neighborhood and city Facebook page to unload my unwanted stuff. Either option is a good one, and we all have stuff laying around that we no longer need.
The Bottom Line
Are your finances out of control? Only you can make the changes required to turn it all around. Fortunately, with the right attitude and a certain amount of follow-through, you can start living the life you really want.
Have your finances ever been out of control? What did you do to change them?