They say when it comes to money; it is easy come, easy go. Yet, it does not always have to be that way. Overspending is a state of mind, not a state of financial health. It’s easy to let finances spiral out of control. It feels more complicated to get back on track with money, but getting finances back on track is essential to long-term financial health, and easier than you might think.
1. Budget
If you don’t have a budget, you need one, and you need one STAT. If you do have a budget, you need to open it, update it and start now.
Budgets are an overview of your financial situation. Think of it like a health chart in a doctor’s office. Without documenting what’s right and wrong with your body, the doctor cannot provide a reliable diagnosis. The same holds true with your money. Documenting your income and expenses, helps you pinpoint your current financial condition, and gives you a springboard on instant correction to financial pitfalls.
Mint.com is a leading online resource that helps users plug in financial information and gives an easy to read overview of budgeting for all of your accounts. Checking, savings, investments and credit cards can all be linked to this free one stop shop. Stop making excuses and start using a budget.
2. Evaluate
Once the numbers are plugged in, your job isn’t quite done. Before you start patting yourself on the back for all of your hard work, it’s time to evaluate your spending. This is a difficult step for most people, since bad money habits are easy to justify and even easier to repeat. Start thinking in the long term. For example, if you buy that $400 Coach purse today, that’s $400 you won’t have to go on vacation. Make a point of translating seemingly small weekly or monthly expenses into annual amounts. For instance, a $200 a month cable bill costs you $2,400 a year. That’s $2,400 you don’t have to invest, save for retirement or set aside for your children’s college expenses. It’s time to wise up to your money and hold yourself accountable for spending habits. Once the budget is done, really look at what can go; cut back and cut out your spending. Many people can reduce expenses by as much as 1/3 by being more fiscally responsible; there are many things we can live happily without.
3. Simplify
Instead of making your budget a chore, make it part of your daily routine by changing your relationship with money. The most successful money managers in the world take a pulse of their checking, savings and investments each day. Log in to your bank account or budgeting software each day and be honest about where you are at in your financial life. Keep it simple and updating a budget won’t feel like a chore, it will feel like a normal daily activity. Once you reprogram your thought process, and watch savings begin to climb, you will find yourself without reluctance to checking on the status of your money.
4. Rinse and Repeat
Completing the steps to getting your financial future under control is a superb starting point, but, make no mistake, it is only a starting point. The key with budgeting and long-term good money habits remain in your hands and in the consistency you use on a daily basis. Be diligent, be consistent and increase your wealth.