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A STEP-BY-STEP GUIDE TO SOLVE YOUR MONEY PROBLEMS AND FINALLY LIVE DEBT-FREE!
Money seems to be one of the things we worry about the most.
We never seem to have enough and we always want to make more. But you should never forget that managing your money is one of the most important steps to live a debt-free life.
How much time do you actually spend managing your money every week?
And I don’t mean stressing about it, worrying about not having enough or wanting more. I am talking about understanding exactly where your money goes, how much you are spending and own much you own.
Isn’t it odd that we spend so much time earning money and so little time learning more about it?
What would happen if you invested a bit more time to understand how to use money as a tool, and make it work for you? Instead of working for money?
1. Take control
Take 30 minutes a week to take control of your financial life: think about what you want to achieve with your money. Set savings goals, track your net worth.
2. Calculate your income
It’s a pretty obvious step, but you need to make sure you know exactly how much you bring home, after all deductions and contributions, like a 401(k).
If you are self-employed or run your own business, calculate how much you earned on average in the last three to six months.
3. Identify your goal
Do you want to save for the holiday of your dreams? Or repay your student loan? Identify your goal. It needs to be clear and achievable.
Clear and achievable goals
- Save $3,000 ($250 a month) in 12 months for wonderful overseas holiday
- Repay a $60,000 student loan in 10 years ($6,000 a year, $500 a month – we are ignoring interest here for simplicity)
- Save 30% of my net income
- Save some money to go on holiday
- Repay my student loan as quickly as possible
- Save a bit of money every month
You can see how the clear and achievable goals will put you in a much stronger position and become more manageable.
4. Make a budget
Creating a budget is really going to help you manage your finance!
- Calculate your fixed expenses (mortgage or rent, bills, car payment, insurance). These are all the expenses you can’t easily control or reduce.
- Calculate your variable expenses (groceries, travel costs, phone bill, cable, entertainment, clothes, holidays and cappuccinos in the morning!). These are the expenses you can really reduce and better manage by finding good deals or cut them out altogether.
Analyze your spending in the past three to six months and set goals for your variable expenses. Determine how much your spending will be in each category and start tracking your expenses going forwards. This will really help you to stay out of financial trouble.
You can use a simple excel spreadsheet, apps that connect to your bank account and help you categorize each transaction, like Mint or use Personal Capital, a free software that allows you to manage your entire financial life in one place. You can track your net worth, create a budget, manage your investments, plan for retirement and reach your goals faster!
5. Pay yourself first
Once you have identified your goal and you know what your expenses are every month, set aside the money you need to reach your goal first! As soon as the paycheck is in, pay your loan, move your money to your investment account, or move it into a separate savings account and forget about it.
Then go on, live your life and spend the rest!
6. Stick to your goals
What’s the point of spending time and effort making a plan if you don’t stick with it? Make sure you review your spending on a regular basis, you adjust your budget, and you keep aiming at your goals!
If you are having trouble sticking to your budget every month, analyze your spending again. You have to make sure your goals are real and achievable or you will feel like you are failing every month. It’s about building habits, not about depriving yourself of everything you love.
Start with small steps and grow into it!
Ready to live a debt-free life?
Follow these simple steps to learn how to manage your money, stay on top of your finances, and make sure your financial future is in your hands!
These easy-to-follow tips will help you to become debt-free, and stop worrying about money.
You’ll be one step closer to financial freedom in no time.
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