People often tell me they feel overwhelmed at the thought of working to gain control over their money. I get it. Starting with tens of thousands of dollars in consumer debt, we were overwhelmed too. Still are some days. Some days the steps we are taking to become debt free and build wealth seem so incredibly pointless that we wonder if it’s even worth trying.
But the truth of the matter is that every little bit helps. Every extra dime you put toward debt, in retirement savings or in your emergency fund is another dime you’ll have to produce financial security. And those dimes do indeed add up over time.
So for those feeling overwhelmed by their finances, I thought I’d share a few action steps that are quick, easy and will make a difference over time when it comes to improving your finances. The tips are kind of “set it and forget it tips” that won’t add to your feelings of being overwhelmed but will help improve your finances.
The first three tips I’m going to share aren’t as easy as the rest, but you can still do each of them in less than fifteen minutes and by completing them you’ll establish a firm foundation for having success with the other action steps.
1. Write Down Your Numbers
This might seem scary, but believe me when I tell you it’s a powerful tool that will help you get motivated to take your action steps. Write down who you owe, how much you owe them, the monthly payment and the interest rate. In another column, write down all assets including savings, retirement, homes, cars, etc.
2. Make a Quick List of Your Financial Goals
And don’t just write down “I want to be debt free.” Write “I want to be debt free so that……..” This is your motivational list of whys that will help you stay on track with your action steps.
3. Write Down Your Monthly Expenses
Better known as a budget. Write down your financial obligations, how much you spend (or should be spending) on groceries, gasoline, etc. Every step toward financial freedom will help you reach your goals faster.
The Building Blocks
These are the “set it and forget it” action steps that will pave the road for improving your finances.
4. Set Up an Automatic Transfer Between Your Checking Account and a Savings Account.
Coordinate the dates with your paycheck arrival. Use a savings account that is difficult to access. Make the dollar amount small enough that you won’t really miss it and make a commitment to forget about the money until a truly important purpose comes along.
5. Start Equating Purchases with Pay
Whenever you’re tempted to spend money you don’t need to spend, ask yourself how many hours you need to work to pay for the item. For instance, if you make $20 an hour and want to buy a $60 pair of shoes, you’ll need to work three hours to pay for those shoes. Is three hours of work at your job worth the purchase? If not, put it back on the shelf.
6. Increase Retirement Contribution
Use automation and remember that it doesn’t have to be a large amount. Increase contributions by one percent, or commit to putting $25 a month into an IRA. Just add a bit more each month and let compounding interest do its wondrous work.
7. Commit to Stop Using Credit Cards
Choose to stop relying on credit cards to make up for income shortfalls and to live within the money you make each month. I’m betting you won’t miss the “extras” you used to buy very much once you see the card balances start going down.
8. Add Just a Little Extra to Debt Payments
Again, $10, $20, or $50 will do wonders over time. Just make a commitment to add an additional $10 to each minimum loan or credit card payment and watch the numbers drop faster than you’d imagined.
You can also use goals for increasing motivation. For instance, we’re set to reach a mortgage payoff milestone, and I wanted to reach it by the end of the year. I figured out that we can reach our mortgage paydown milestone by adding a measly $10 a month to our mortgage payment for September, October, November and December. I could’ve just waited it out and reached the milestone in January, but won’t it be fun to start the new year with that new, lower balance?
9. Trade in Dinners Out for Cooking Nights at Home
Cooking at home can be really fun, especially if you’re trying new things or working to mimic your favorite restaurant meals. And the money you don’t spend at restaurants can go a long way in improving your financial situation.
10. Practice Thinking Big Picture
One of our huge budget sucks was going out to eat. We justified the $250-$300 per month expenditures by telling ourselves that we “deserved” a relaxing night out because we worked so hard.
Eventually we learned that we deserved financial freedom more than we deserved a relaxing night out, and those dinners out became more of a punishment than a reward. We now eat out very rarely and don’t miss it at all.
Figure out what your big picture goals are and start putting them in place of your short-term thinking.
11. Start a Change Jar
Throwing all of your change in a jar can add up to several hundred dollars a year that can go toward debt or other financial goals.
12. Practice Gratitude and Contentment
Compare yourselves with those who have less instead of with those who have more. Volunteer at a food shelf or other organization that helps the needy. Thank God for five things each day. Read stories from the Great Depression. Practicing gratitude and contentment will help you to think twice before spending money you don’t need to spend.
13. Sell One Thing
Pick out one item that you own but no longer use, and sell it to a family member, friend or a person on Facebook or Craigslist.
14. Make a Menu Plan
Make a list of thirty meals that you and your family like to eat each month and shop so you have the ingredients on hand. This will help you avoid unplanned trips to the local take-out or sit-down restaurant.
15. Trade in Cable or Satellite for Netflix
Cable and Satellite subscriptions cost between $30 and $150 a month. Netflix is $10 a month. What financial freedom gains could you make with an extra $240-$1680 a year?
16. Calm Your Schedule Down
Reduce activities and social event commitments. Spend more time at home relaxing. This will help you avoid “stress-reducing” expenditures.
17. Brown Bag it to Work
You don’t even have to do this every day. But for every day you do it, put the money you would’ve spent on eating out into your change jar or transfer it from your checking account to your savings account.
18. Surround Yourself With People Who Are Also Seeking Financial Freedom
If there’s no one in real life, start reading lots of personal finance blogs. Camaraderie builds strength and solidifies good financial decision-making.
19. Read a Book That Will Motivate You
Reading books by people who’ve found the key to financial success is very, very motivating. Some of my favorites are:
Money Love: A Guide to Changing the Way That You Think About Money This book shares the story of a woman who dumped a half million dollars in debt after she figured out why she was spending in the first place.
The Total Money Makeover: A Proven Plan for Financial Fitness Loaded with stories about regular people who got out of debt and contains a nearly foolproof plan for dumping your own debt.
Start Late, Finish Rich: A No-Fail Plan for Achieving Financial Freedom at Any Age (Finish Rich Book Series) Because it’s never too late to start working toward financial freedom.
By the way, most libraries have Total Money Makeover and Start Late, Finish Rich available, so if you’re not interesting in owning them, check them out at your local library.
20. Drive Nice
Obeying all traffic laws and driving gentler on your car will reduce gasoline consumption, stress levels and will help your car to last long and have to be repaired less. It all adds up!
21. Cut Down on Energy Usage
Turn the lights off. Turn the thermostat up two degrees in the summer or down two degrees in the winter. Use less water. Pretty soon the changes will become so automatic that you wouldn’t notice them except for the lower energy bill.
And remember, you don’t have to do all of the things listed here. Just do one. Or two.
The point is to make little, easy steps of progress that will eventually add up to big results.
What suggestions do you have for easy steps of progress that will improve finances and help reduce those overwhelming feelings people can have about their financial situation?