Do You Control Your Money or Does Your Money Control You?

money troubles

money troubles

I had a conversation with someone who has consistent financial troubles. I learned the main issues were a lack of sufficient income and money management skills. I began to offer suggestions such as searching for a higher paying job, limit eating out and carpooling to work. Unfortunately, every suggestion I gave was immediately shot down with what I considered to be an excuse. In the middle of the conversation I realized I wouldn’t be able to help this person. In hindsight, I don’t think the person wanted my help. It made me realize that some people aren’t truly ready to make improvements to their finances. If you want to improve your finances you have to be ready to get real. The first step is to take responsibility for making your situation better.

I began noticing a pattern when speaking to people about their money issues and concerns. What I heard was complaining about not having enough money and not getting ahead in life. The few times where I interjected and asked what they planned to do about it, I could tell my question was unexpected.

I pose the same question to you, if you are unhappy with your financial status, what do you plan to do about it?

Do you honestly want to put in the work required to generate change? Or are you hoping your money issues will work out on their own?

Do you believe that you can live a better life? Or do you quietly tell yourself that everyone struggles with money and you are no different?

Today I saw the quote, “In order to succeed, we must first believe that we can.”-Nikos Kazantzakis

The mind is an incredibly powerful tool. If you don’t have the correct mindset you can sabotage your journey before you even take the first step. You can be told over and over that it is possible for you to increase your quality of life and decrease your financial stress. However, it will never happen if you do not BELIEVE it can happen.

If you are having a hard time taking control of your finances and you think the task is too big, then start small. Set small obtainable goals and prove to yourself that getting a handle on your finances is possible. Your goal should have clear and measurable results.

For example, if you need to increase your savings, make a goal that every time you get paid you will put a certain amount into a savings account. You can start out small with $25 or 5% of your pay. Challenge yourself to do it for three months. Another goal could be to decrease the amount of money you spend on eating out. Allow yourself to eat out only once a week for a month.

The goal is for you to turn these trial practices into habits, but you have to take the first step. Once you have smaller challenges under control you can then begin to focus on your bigger financial problems. Remember you didn’t get into your current financial situation overnight. It may take some time to get you on the right path, but slow progress is better than no progress at all.

Continue to remain encourage and move towards progression. “If you believe it, you can achieve it”, may be cliché, but it holds a great deal of truth.

Don’t Spend Money You Haven’t Earned

It is that time of year again, when we gather with friends and family around a large feast and discuss why we are thankful. While you take this much needed time for reflection, know that there is a well-developed plot against you that is about to unfold. It is what many Americans have come to know as Black Friday. Black Friday is the day after Thanksgiving that marks what some say is the official start of the holiday shopping seasoning. The term “black” refers to retailers making a profit or “being in the black”.  The day was designed to separate you from your money.

Studies have shown that Black Friday is one of the busiest shopping days of the year. According to the National Retail Federation,  in 2013 consumers spent $57.4 billion dollars during the Black Friday weekend. What makes Black Friday so different from the other 364 days of the year? The lure of rock bottom prices, steals and deals that retailers claim you will only see on this one day. People line up and camp out at stores, hours even days before the Friday store opening, to ensure their chances to purchase that “must-have”.

I am not sure if this is capitalism at its best or at its worst. I don’t think I need to say (but I will), that $57.4 billion dollars is a heck of a lot of money. I wonder how much of that was actual money that consumers had versus credit they used. I know it is easy to be lured in and to think that you are actually saving money with Black Friday deals, however it is only a deal if you have the money to make the purchase.

Get out of the habit of spending money that you have yet to earn. That is exactly what is happening when you use credit cards with the intention of paying them off at a later date. After paying the interest that accrued, I guarantee you that the purchase wasn’t much of a bargain when it is all said and done.

I say this from experience because I would shop on Black Friday religiously, and used my credit cards without hesitation. I would swipe my cards without any immediate consequences and rave about the money I “saved”. Once I received the credit card bills, reality set in. I, like many other credit card holders, didn’t have the money to pay off my balances. I then struggled to figure out how to pay these new bills with my existing expenses.

As the saying goes, “When you know better, you do better”. I no longer make this common financial mistake.

Going into debt to get more “stuff” simply isn’t worth it. Being able to sleep at night without financial worries, is far more valuable than the last electronic or a new pair of jeans.

Remember, if it is not in your budget, you can’t afford it.

Happy Holidays and remember to be financially responsible!

Image

Creating A Monthly Budget

Now that you have an understanding of where your money is going each month, it is time to create your monthly budget. The term monthly budget doesn’t always spark positive thoughts. A budget may be looked at as being restrictive or a hindrance to your lifestyle. I don’t want you to view it that way. A budget is a tool used to help you maintain your standard of living and meet your financial goals.

What are some of your financial goals? Is it to pay off your credit card debt? Save for a down payment on a house? Or increase your emergency savings fund? Whatever your goals may be, budgeting will help turn them into a reality.  Create a chart similar to the one I have below. List your goals and figure out how much money you need to obtain them. Then determine the timeframe in which you want to achieve each goal. . Give your goals a priority, because you may not have the funds to accomplish each goal at the same time. Therefore, you may have to wait before you can add a goal into your monthly budget. Below is an example of the worksheet:

Goal Total $ Amount Need  # of Months to Reach Goal  $ Need Each Month Priority
Vacation 1000.00 12 83.33 3
Laptop 500.00 12 41.67 4
Six months of Salary in Savings 18000.00 60 300.00 1
Create fund for Home Repairs 5000.00 36 138.88 2

Now we are going to construct your monthly budget. Use a spreadsheet application to create your budget. If you don’t have access to software, you can construct a chart similar to the one I have below.  You will add the following sections:

  1. Net monthly income
  2. Monthly expenses
  3. Lifestyle Expenses
  4. Financial goals

Subtract the total of your monthly expenses, lifestyle expenses and financial goals from your net monthly income. Below is an example:

Net Monthly Income 
Bi-Weekly Paychecks $3,000.00
Child Support $400.00
Total $3,400.00
Monthly Expenses
Mortgage/Rent $1,100.00
Car Payment $300.00
Utilities $250.00
Cable $100.00
Credit Cards $100.00
Car Insurance $85.00
Cell Phone $85.00
Total $2,020.00
Lifestyle Expenses
Groceries $250.00
Gas/Transportation $160.00
Clothes/shoes $70.00
Eating out $50.00
Hair Done/Cut $50.00
Total $580.00
Financial Goals
Six months of Salary $300.00
Funds for Home Repairs $140.00
Savings for College Tuition $200.00
Total $640.00
Net Monthly Income $3,400.00
Monthly Expenses+ Spending+Fin. Goals ($3,240.00)
Balance $160.00

After completing your budget, if your balance is positive, meaning you have money left, congratulations! You have created a budget that is within your means and have increased your chances of sticking to it.

If your balance is negative, meaning you do not have any money left, you will need to rework your budget. You have to reduce the amounts designated to your lifestyle expenses and your financial goals.

Remember the amount spent on each item within your monthly budget doesn’t have to be set in stone. You should always be looking for ways to reduce your expenses. Also once you accomplish one of your financial goals you can remove it from your budget and work towards the next goal on your list.

Keep your budget somewhere easily accessible so that you can refer to it and become familiar with it. If you are having trouble sticking to your budget you will need to re-work it or use greater discipline in your spending habits.

If you have any questions or need some advice, just ask. I would be happy to hear from you! Stay tuned for my upcoming posts on ways to save money and stay within your budget!