Tuesday, April 24, 2018

Where Do I Start?

Getting control of your finances can be a very difficult thing. It is messy. There are a lot of moving parts. It can even be downright terrifying! Relationships usually complicate things even more. You can easily feel completely overwhelmed. So you might find yourself asking, "Where do I start?" This is a great question because it shows you are ready to start.

First, unpack your financial baggage. Take a good long look over the last few months of bills, spending, and debts. Pull a copy of your credit report to make sure you aren't forgetting anything. Lay it all out and take a good look. At this point, one of two things will happen. You'll realize that things aren't as bad as you thought. Or your numbers are sobering because things are worse than you expected. Both of these reactions are alright. The important thing to remember is you need to know where you stand in order to do something about it.

Second, balance your budget. There are only two sides to the equation- Income and Outgo. If your expenses are more than your income, which is very common, there are only two things to consider- cut expenses or raise your income. Usually a combination of both is needed. The deeper you cut, the faster you can pay down debt.

Third, Prioritize your spending. This is essentially a budget- telling your money where to go. Start with food. How much money does it take you to buy groceries? I'm talking basic groceries, not pricey pre-packaged convenience foods. You would be surprised how much you can save just by meal planning, food prepping and shopping sales. Even if you have food allergies or special diet considerations, cooking at home is cheaper and healthier than eating out. It takes time and planning, but no matter what your circumstances, you can trim this expense. Next you want to pay for housing. This includes your rent or mortgage, all utilities and insurance. Transportation is next. Pay your car payment(s) and gas or buy your transportation pass. Last is clothing. Again we're talking basics. You would be surprised at what you can find gently used at your local thrift store. These are what form your four walls. If you can afford these, no matter how bleak your circumstances, you will live to fight another day because you've got a roof over your head, clothes on your back and food in your belly and a way to get to work.

Fourth, consider selling something. This can be a car that is ridiculously expensive. A good rule of thumb to sell is if your vehicles total more than half your annual income. Or sell extra stuff you don't use or need anymore. Have a big garage sale or sell items on Ebay, Craigslist, Facebook, Instagram or other online yard sale sites. The house is the last thing I would consider selling and that's only if the payment is half your takehome pay with no prospect of having your income increase dramatically.

The Fifth and final thing you need to know to get started is to keep going! If you are new to budgeting, give yourself a solid 90 days to get used to it. I guarantee there will be hard, horrible days, but I promise it's worth it. I've been there and can tell you there isn't a greater feeling than seeing the fruits of you labors.

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