Everyone has financial goals of some sort. Whether yours is getting out of debt, saving for a big purchase (like your very own home) or increasing your income, we can all use a little guidance and simplification. Here are a few easy and powerful ways to take control of your money, so it doesn’t take control of you.
Find Your Money
First do some investigating. If you’re someone who wonders why you end up with so little money in the bank at the end of each month, you need to dig into where your money is going. You might think you know, but until you actually review your bank statements and face the reality head-on, you might be missing some key aspects. Print out your last three months of bank statements, and get out a highlighter. Highlight any item that shows up repeatedly, as well as any item that’s higher than $20. Then go back and decide if these expenses are essential or if they can be axed.
The next step is to look at all of your recurring bills. If you keep seeing charges from the iTunes store but don’t know what they’re for, call iTunes! You could be paying for an app that you no longer use, which is money down the drain. Also review your cell phone bills. If you keep getting nickel and dime’d by your carrier every month, consider changing to a more transparent option like the new T-Mobile ONE which offers a flat rate. This will help you know what to expect each month, and not have to worry about going above your data or text allotments. Taking some time to clean up your existing financial relationships (if you’re not still using Netflix, stop paying for it!) can open your eyes and reveal numerous opportunities to pare down and keep more money in your pocket.
A Budget is Your Best Friend
Once you know where your money has been going, now it’s time to tell it where to go. If you’ve never budgeted before, it’s the best proactive step you can take toward any financial goal, big or small. You can create a budget with good old-fashioned pen and paper, or you can use a budgeting software like EveryDollar, which is an intuitive way to plan for and track your money online. Either way, the idea is to get your monthly income actually written down in ink or entered into your computer, and then to plan out the expenses you expect to have in a given month.
Base your estimates on what you’ve spent previously, and also include a category for “unplanned expenses” when you’re new to budgeting so that you have a cushion for those small items you might forget about when writing your budget. The most exciting part of a budget is that it’s actually very freeing. Instead of feeling constrained, a budget gives you permission about what you can spend in each area. And when you’ve reached the amount you’ve budgeted, you’re done in that category for the month.
Pay with Cash
One secret of many of the wealthiest people in the world is to never borrow money. If you plan to avoid debt at all costs, then you need to be sure you’re saving each month for larger expenses that might come up down the road and also tucking funds away in a rainy day fund. The other trick to staying away from the trap of debt is to use cash for everything. A debit card is fine, since that’s essentially the same as using cash, but if you can start using actual cold, hard cash, you’ll be leagues ahead in terms of staying in control of your money.
The ideal scenario would be to prepare your budget before the first of the month, then to take out cash for each of your major categories that you pay for in-person (groceries, your daily latte, toys for your child, etc.). Then use that cash as you go. Once it runs out, you no longer can spend money on those things. Rachel Cruze, daughter of famed financial expert Dave Ramsey, recently designed a wallet especially for people who want to use cash as their primary way to pay. A wallet like this can keep you organized – and away from debt! But whether you use this or your own system, it’s wise to give cash a try.
Any journey begins with a first step, and this is true with financial dreams as well. No matter how lofty your money goals are, you can start on the path to achieving them by taking control of your money today. Good luck!
