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10 Things You Can Do RIGHT NOW to Change Your Financial Life
By JLP | September 8, 2010
No matter how bad your current financial situation is, there are things you can do to turn it around. I’ve created a list of ten that I could think of. This isn’t an exhaustive list by any means but it will give you a start:
1. Gather ALL of your financial papers together. This step will require a lot of work and some digging around. I recommend you go through all of your financial papers and organize them. Electric bills, credit card statements, loan paper work, mortgage, bank statements, etc. Make a stack for each and arrange them by date.
2. Organize your financial information in a spreadsheet. You can title the spreadsheet “Budget 2010″ or whatever you wish. I recommend a tab for each spending category and then a summary page.
3. Create a budget from your spreadsheet information. Give it its own tab in your spreadsheet. Figure out ALL your bills (monthly and annually). Take the annual bills and divide them by 12 to get a monthly amount. Don’t forget Christmas, birthdays, and school supplies. All three of those are biggies and can really mess up your budget if not planned for.
4. Analyze your budget. Look for areas that you can either eliminate or cut back on. One of the sore spots in our family budget is in eating out. We simply spend too much money eating out. Not only are we spending too much money, it’s also not healthy. But, I would not have known this information had I not spent the time to analyze our spending. Look for areas that are overlapping or redundant (cell phone service and long distance from your home phone). If you can’t cut enough to balance your budget, consider other options like working more hours or taking a second job.
5. Add a tab in your spreadsheet for your net worth statement. You’ll want to update this information on at least an annual basis. If you find your net worth discouraging, just remember that it will improve over time as long as you are taking the necessary steps to make improvements.
6. If you have a lot of credit card debt, make a plan to get out from under it. Start by listing out all your debts from smallest to greatest. You can even set up a credit cards tab in your spreadsheet. Be sure and get the balance owed, minimum payment, and interest rate information. Write down the exact amount you owe. Remember that number! Put it on a notepad beside your bed so that you can remind yourself of how much you owe. Figure out a plan to pay it off and write down the due date along with a reward for paying it off. Track your progress.
7. Set aside a little money each pay period for emergencies but ONLY use this money for an emergency. You’ll be surprised how quickly even $50 per month will add up as long as you save the money and forget about it. Take any extra money you receive and put in your cushion account. Ideally, you should have $500 – $1,000 in your checking account as a buffer for unexpected expenses.
8. Take advantage of your company’s retirement plan (if they have one). Don’t forget to put AT LEAST enough to get the full company match, which is often a 3% match on a 6% contribution. If you can put in 6% and your company matches 3%, that’s a 9% contribution. Not bad. And, your contribution is pre-tax, which means it’s not costing you as much as you think.
9. If you have enough savings available, consider contributing to a Roth IRA.
10. Find cheap entertainment. Read books. Exercise outside and not at a health club. Go to the park. Take the kids to library. Eat at home. My wife and I have decided that we are not going to eat out more than 2 times per month. It takes planning to accomplish this. My wife has created a 2-week meal plan and shops accordingly. Having a grocery plan has helped us cut back on unnecessary trips to the grocery store, which always seemed to lead to overspending.
Like I said earlier, this isn’t a complete list. Rather, these are steps that will help you head in the right direction. The main thing is that you get started.
Topics: Budgeting | 4 Comments »
September 8th, 2010 at 6:02 am
Yikes… I have a lot of room for improvement when it comes to getting organized. Thanks for this list!
September 8th, 2010 at 6:22 am
This is a great list and it’s important for people to recognize that this is a list of things we can all control and influence in our own lives. And this is the most important lesson, I think.
Far too many people spend way too much time and energy (and money) focused on things over which they have absolutely no control — like the market, or interest rates or tax legislation.
By focusing on the things you can control, you’ll be light years ahead of most people.
September 8th, 2010 at 11:27 am
Ditto on the eating out. I’m trying to limit it to 10 times a year for nice meals–5 for our bdays, 1 for our anniversary (#20 today!!) and 4 for other exciting times…one of which is an end of year celebration for the boys’ stellar report cards. I am not including take out pizza, etc in this 10x number, but we are mindful of cutting that back, too.
I’d much rather relax at home w/my own beer and wine than pay 3x what I need to at a restaurant, and a tip on top of that! Now I just need to become a better, more creative cook…Good thing I have my library of (dusty) cookbooks!
To your above list I would add simplify your financial life. Our utilites get paid either from a credit card or from a debit to our checking acct. For our homeowners’ assoc dues I have ING set up to pay and mail these, so essentially I am saving money on 24 stamps in a year. I also have paperless billing for almost all my accounts. I save a pdf of anything I might need to refer to.
In the shopping arena for needs (ok, and wants), I’d recommend using coupons, doing rebates, and shopping w/on-line discount codes, esp thru your Upromise or Discover links.
Another recommendation would be to review your prior year tax return to make intelligent choices for your 2010 tax situation. For any charitable contributions I’ve stopped printing copies of the checks but instead save an image in a file folder for the current tax year.
September 8th, 2010 at 3:57 pm
Presently the President is proposing a 50 billion stimulus ( he wants to call it something else, but stimulus is what it is ), for road repair. What it boils down to is that no matter how well we budget, we are being bled dry by these stimulus’s. Meanwhile the Special Interest Groups, incl. Banks, Corps., etc and others who have received millions and billions – in Bonus’s, although they failed at their jobs, will eventually ride off into the sunset.