To get a grip on your finances is possible! Healthy finances bring peace. Everyone knows that. It’s difficult to have peace and magic in your life with creditors calling, and unpaid past due bills sitting unopened (because you can’t face it) on your desk. Living paycheck to paycheck doesn’t have to be a way of life. You CAN work through it and get to the other side.
Yes, it’s tough, and you must have patience but like anything else, if you go at it with the right attitude and determination to make it happen, you’ll get there.
Here is my strategy to get a grip on your finances and bring peace into your life:
The First Step to get a grip on your finances is Breathe
Before we go any further, I want you to take a few deep breaths, and tell yourself that you can have peace and you can get a grip on your finances. The first step is releasing the fear associated with it and changing your mindset to know that financial freedom is possible.
Face the Facts
Ignoring all those un-opened bills and avoiding phone calls will not make them go away. Whether you are addressing these issues or not, they are weighing heavily on your mind, and costing you precious energy – and peace. To address this issue, do this:
1) Write down everything you owe, from your mortgage, to your smallest credit card. I’m not talking about minimum payments, I’m talking about the entire amount you owe. Go back to past bills and look at the payoff amount. Call your bank for your mortgage payoff if you don’t know it. If you need to, go back to taking deep breaths as you do this, but know this is the first part to finding peace and financial freedom.
2) Now out beside each payoff amount, write down your monthly payment due. Then add up your monthly amount due at the bottom.
3) Next figure up (as best you can) your monthly costs for groceries, gas, insurance, utilities, and anything else that you receive a bill for in the mail. Don’t forget about those bills that may only come quarterly, semi-annually or annually. Break these down per month and add to your total.
4) Put all of this together. You should have a list for all of your loans/credit cards and down below itemize the estimated monthly costs for the expenses you came up with in #3. Add all together and write down the total.
5) Now take all your sources of income and list it on the other side. If you get paid weekly, multiply your NET pay by 4.3. If paid every other week, multiply by 2.15, and if twice a month, multiply by 2. Remember this is your NET pay – after taxes, insurance and anything else that comes out. Don’t forget other sources of income, like child support, etc.
6) You should have two totals listed on your page – what you owe in one column and what you make and or receive in the other. This is facing the facts!
There are two ways to bring in money – Everyone knows the first one is your income or paycheck. But what many forget is that for every penny saved is a penny earned. Oh sure you’ve probably heard that cliche hundreds of times, but have you ever really thought about it?
Get a grip on your spending habits
I want you to take a look at what you are purchasing. Get a notepad and record EVERY.SINGLE.THING you buy over the course of one week. Save the receipts. Whether it’s a pack of gum at the gas station, or a daily cup of coffee from Coyote Coffee, save the receipts and add it to your spending list.
I’m pretty sure you will be amazed at the un-necessary purchases you have made. You may try to justify these, but keep them in a third category.
I remember once during a particularly stressful financial time in my life, I was in the car with my sister, who wanted to stop by a Burger King to get a milkshake. (This is when we were both skinny and didn’t think about calories.) I remember telling her that I couldn’t get one because I didn’t have the money. Now that was embarrassing but it was the truth. I’m pretty sure she bought me a milkshake that day, but it was humbling to say the least. So just know that I’ve been where you are!
My point is, don’t spend money you don’t have on frivolous things -even if they are only a couple of dollars, because a couple of dollars here and there and there again add up. Believe me, the sacrifice will pay off in time.
Pay Yourself First
This may sound counter-intuitive and is quite different from spending on silly purchases. Pay yourself as much as you possibly can and put in a savings account. Don’t not do this – ideally it would be 10% of your income, but even 10.00 a week would help, but try to do for as much as you possibly can. When you get your check, go ahead first thing and take out your said amount and stick it in a savings account in the bank. You are only allowed to touch it for true emergencies like your car breaking down, or a vet bill to save your dog’s life. Not for a party dress for your class reunion!
Find ways to save money on the items you must spend money on like groceries. I have a friend who has learned how to coupon – yes couponing is a real thing and you can save tons doing it. Figure out creative ways to save.
Also, look back over your past months of paying bills. How many finance charges or bad check charges did you pay? It is horrifying at how many people will pay extravagant fees for paying slow. Don’t let this happen! Do everything you can to pay your bills ON TIME with AT LEAST the minimum about due!
Know your interest rates. If you are making a minimum payment on a bill where the interest rate is at 18%, you are basically not getting anywhere. Figure out ways to make a real dent in paying down the principal.
I highly recommend listening to financial gurus like Dave Ramsey, who has a podcast and all sorts of resources for bringing financial peace and freedom.
Get a part-time job
If you are truly in a financial bind and that left column you figured above is much larger than the income column, you may need to think about getting a second part-time job. Remember, it isn’t forever. Only until you can get back on your financial feet. Even five hours a week somewhere could help tremendously. The extra money earned to pay off those bills will give you a boost of confidence and will be well worth the extra time away from home. Note: I do not recommend a multi-level marketing business that requires an investment up front. That may be fine for later, but get on your feet first! Just focus on bringing in more money for now.
Be upfront with your creditors
The next time your creditor calls, answer your phone and tell them that you are doing what you can. Try to work out some kind of agreement with them if you can’t at least make a minimum payment. Most of them will try and work with you, and some may even drop your total amount due if you will agree to certain terms.
Pay off the smallest bills first
Go back to your original list where you wrote down the payoff amounts on all your bills. Go to the one with the lowest balance, and work to pay that one off as quickly as possible while only making minimum payments on the others. Once the smallest bill is paid off, take the money you were putting on that and apply to the next smallest bill. And once that is paid off, go to the next, and so on. This will give you a much needed sense of accomplishment, and it motivates you to keep going. I need to say this – Do NOT take the extra money you will gain after paying off a bill and go buy something else you don’t need!
Stay the Course
Getting a grip on your finances can take time. But don’t give up, and don’t give in. Just keep plugging away and eventually it will happen. Imagine yourself writing paid-in-full on that last credit card bill, or student loan. Think how freeing it will be when you have more money left over at the end of your month. Or when you have an emergency, you have the money in your savings to easily pay for it.
Again, getting a grip on your finances is worth every sacrifice you will make. You can’t put a price on peace.
(This post is outside of what I normally post here, but I’ve had several people talk to me about finances lately, and since I have personal experience with this, and since I’ve worked in the accounting field my entire life, I thought I’d go ahead and write this post in hopes of it helping some of my readers. After all, this blog is about making your life beautiful and what could be more beautiful than having peace through financial freedom.)