Let’s face it. Money makes the world go round. Many people may not want to face reality but finances are a significant part of everyday life. Today I mustered up the courage to look at my credit card statements from the last few months. Boy was it an eye-opener! How did I get so ahead of myself? I’m sure a large number of people ask themselves this question every month and then they forget about it. You shouldn’t put this on the back burner. Reviewing your financial statement should be a wake-up call. The question is,what to do next?
- Admit the guilt. This debt didn’t create itself. You caused it. You–as in you, me, and the millions of other people in debt. Whether it was a product of necessity or an outcome of recklessness, the consequence is a bill that needs to be paid. This could be because of several purchases or that one big purchase or even the process of schooling that you are now faced with debt. The amount varies for many but the bottom line is that you owe money. What are you going to do now that you’ve accepted your current situation?
- Keep track of your expenses. Even though people know they are in debt, they are not aware of the depth of their indebtedness. There are various sites and apps out there like mint.com, GoodBudget, Mvelopes, and Billguard, just to name a few. It is important to track expenses and know where your hard earned money is going. These sites will allow you to budget, save, and most of all allow you to be mindful of your spending. Which brings me to my next point…
- Budget, Budget, Budget. I can’t stress how important it is to budget. It helps maintain focus and prepare you for the future. Many things can be anticipated. For example the phone bill, electricity, gas, car loan, etc. For the items that aren’t set, these can be approximated. That will allow you to gauge the allocation of your finances and find areas to save.
- Savings make the world go round. I am very thankful for savings that I’ve had during this trying period of my life. If it wasn’t for my savings I would be in a worse position. Many finance experts recommend having a rainy day account containing at least three months worth of expenses. Suzy Orman advises saving for SIX. Now I see why. You never know what unexpected financial situation will come your way. So plan for it. Don’t wait for disaster to hit to start planning. Unfortunately, I didn’t take her advice. I weathered the storm but I learned an important lesson on saving. For those who don’t think they’re capable of saving, make it automatic. Automatic direct deposits to the savings account or schedule automatic deposits from your checking account into your savings. Whatever you do, just do it.
- Accountability and restraint. This means that you don’t have to say yes everything that every friend invites you to. You can gracefully decline or offer a cheaper or even FREE alternative. I find that many twenty-somethings my age view bars and restaurants as a past time. A way of getting together and hanging out. Thats’s true, but attending these places can cause a hole in your pocket. I’ve learned to set limits. I’ll go out once or twice a month and if I want to spend another day with a friend, I’ll invite them for a bottle of wine or a home cooked meal. I call it cost conversion 😉 Plus you’ll have an equally spectacular time.
These are some tips that I’ve learned and have found useful in my path to financial freedom. It takes time to accomplish every goal in life. I hope these tips can help you get one step closer to achieving your definition of financial freedom.