Do you have money problems? If you are like many people, I am sure you do. Statistics tell us that around 70% of people are living paycheck to paycheck.
I also know that this is quite possible because I used to have money problems too. But the good news is that I did not stay there. I have even better news: you don’t have to keep your money problems.
You can trade your money problems for a money plan. In order to complete that exchange, you need to understand where you are today, gain new knowledge, and execute a new money plan.
Understand your Money Situation
The first step in dealing with a problem is accepting that you have a problem. Money problems are no different. You need to accept your current situation.
So, once you accept you have a problem with money, the next step is to decide how big that problem is.
In my case, a lot of my money problems were rooted in not knowing:
- The amount of money was coming into my household every month. In other words, how much income I had available for expenses.
- The amount of money that was leaving the household every month. In other words, I was spending money but I could not tell you exactly on what.
The result was that I was short of money every month. Money was coming in but it was going out at a greater rate.
I had to make up the difference by taking cash advances from a credit card. I was never late on any payments, but I kept falling behind with my debts.
Not only was I falling behind financially, but the amount of stress was growing every month. Money problems will drag you down and affect every other area of your life: relationships/work/health.
So, if you are having money problems, start by gathering some basic facts about your household
- Your net income every month. This is the amount you have available to you for expenses.
- What are your basic expenses? You may have to look back 2-3 months, but you should be able to quickly get an idea of what you spend monthly on rent/mortgage, utilities, auto expenses (including car payments), food, clothing, insurance, etc.
- You should also figure out how much debt you have. What are the minimum payments, when are those due.
- Figure out how much you have in savings (emergency, retirement, college fund, etc.).
You might be afraid of learning how bad things are, but in most cases, it is not as bad as you think. But if things are going to get better, you first need to face reality.
Take courage, it is always better to know the truth. It’s the best place to start.
Gain New Knowledge about Finances
I have learned to do many things in my life but I was not born knowing any of them.
For example, I did not know how to ride a bike but I learned with help from a friend. It took some wild rides and falling down, but I did learn.
I grew in Puerto Rico, so Spanish is my first language. I did not know English but I learned with schooling, help from reading books/newspapers and watching a lot of English speaking TV programs.
The point is that we can all learn new skills, and money management skills are no different.
In my case I did not know how to prepare a budget, I did not know how much I should save for retirement or emergencies, the intricacies of insurance or the dangers of consumer debt.
I really, really needed help.
So I took a personal finance class at my church in order to gain new knowledge. My mind needed new information so I could do something different.
In today’s world, you are very fortunate. There is plenty of information about personal finance readily available: books, classes, online courses, blogs, magazines, etc.
Information is at your fingertips if you decide to take advantage of it. Lack of information is not the problem. Your lack of action is the problem.
So don’t stay where you are and how you are. You don’t have so solve your money problems alone or in one day. But the solution depends on you!
Get help today and start your journey towards financial wellness.
Execute your new Money Plan
With your newly gained knowledge you can get to the task of creating a financial plan.
Here are some basics of that money management blueprint:
- Prepare a budget every month before the month begins. Your planned expenses should not exceed your income. In other words: income – expenses = zero. Now remember, it might take you around 3 months to get it right, but you need to start somewhere. You will get better at it.
- Build up your emergency fund. If you are still have consumer debt (credit cards, medical bills, personal loans, car loans, etc.), you need at least $1,000 as a small cushion. That’s your beginner’s emergency fund.
- Begin to eliminate your consumer debt. Debt is a financial crutch that will always keep you from walking on your own strength. You will not prosper financially while debt is in your life.
Once you get your expenses under control, and once you have a small cushion in savings, and your debt is paid off, you will be on firm financial footing. Your money problems are now replaced by a money plan.
You can then start looking at the future by focusing on long term goals like retirement, college savings, and building wealth.
Remember that having a plan and executing it are two different things. You need to remain focused and persistent.
There will be ups and downs. There will be frustrating days and nights.
But if you stay with it, you will win. You will reach financial victory. I know because I have done it. It was not easy but it was definitely worth it.
What will you do? Will you exchange your money problems for a money plan? Will you begin to exchange despair for hope?
If things are not working out for you, what do you have to lose by trying something new?
Get started today!
Article by José R. Figueroa – Personal Finance Coach/Blogger @ Figueroa Financial.