5 Steps to Take Back Control of Your Money
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We want to be very clear here. We believe each one of our members has the potential to live a financially healthy life. But, what we’re seeing is too many living defeated under credit card debt, mortgages, medical costs, student loans and more.
There are some who would write this article and tell you how simple these 5 steps are and how you’ll see huge results quickly.
But here’s the truth: Taking back control of your money when you’re in debt is hard. It’s not fun. It can be frustrating, heartbreaking and defeating. Many of us know this from experience.
But, don’t miss THIS: It CAN be done. You CAN take back control of your money. And we’re here to help you start, today.
We’ve seen what does and doesn’t work over the years. Let us explain.
What doesn’t work? Ignoring it.
We know, it’s easier for a while to ignore it, to pretend like it’s not there and continue living as you have been. But, you know that the debt is there and has been there for months or years, weighing you down. Ignoring, honestly, just gives your debt time to flourish while your financial control dwindles. We know it’s tempting, but before you resort to ignoring it, try our suggestions first.
What works? Acknowledging it. Building a plan. Taking action.
- Acknowledge it and build a plan. If you and your spouse don’t talk about it, you’ll never get out of debt. You may have been avoiding the conversation, but we urge you to find a time to sit down, uninterrupted and discuss it. Work on building a plan together. It may help to set a time limit so you don’t stay in the conversation for too long.
Here’s a good place to start, sit down and make a list:
- What’s your total monthly expenses?
- List all of your debt, current payoff totals and minimum payments.
- Subtract your minimum payment and your monthly expenses from your total income. What extra do you have left over? This extra needs to go into two places, savings and toward paying your debt. There are different schools of thought on paying off debt, but Dave Ramsey’s Financial Peace University suggests the snowball method. Basically, you pay the minimum on all the payments except for the smallest. Any extra money you have put towards the smallest debt. Once it’s paid off, add that payment to your next smallest debt. Eventually you’ll be putting all of your old debt payments toward your largest debt, quickly paying it off.
Once you have all of this information, you’ll be able to create a timeline and finally see the end of the tunnel. It may be years before it’s all paid off, but it’s time to celebrate when that first one is paid in full!
Seeing the progress is key to this process. You might even create a chart you can color in as you pay off debt. For some, it really helps to see that progress visually. Here’s a free one!
- Save. Did you know that 42% of families believe their emergency savings would last them three months or less. One key to paying off debt is to stop accumulating debt. But, if all of your money is paying for expenses and debt, it makes it hard to take care of those emergency situations or even those extra things that just pop up every month (medical expenses, car repairs, etc.).
So, you may have to start small, but save as much as you can as quickly as you can. Do you get a morning coffee? What if you saved that money every morning instead? Or, think about setting up automatic transfers from your checking account to your savings account. As you build your plan, make sure saving money is a part of it. If it’s only an afterthought, you’ll never think about it.
- Build a realistic budget. Use those numbers from step number 1 and your savings plan from step number 2 and create a budget that will help you meet your goals. One thing though, when this doesn’t work the first month (and it probably won’t), don’t give up on it.
Adjustments may be needed inside your budget and potentially your lifestyle. But, keep working on it, adjusting it and analyzing past months to see where your cash is going. You might discover surprising places your expendable income is going.
There are many apps out there to help you set this up and manage it on the go, or you could even just set up a simple spreadsheet to add to at the end of every week.
- Decide now (as a couple) where extra money will go. Do you usually get a Christmas bonus? Are you thinking of tackling a second job? Decide now where this money will go. Do you want to save for a small vacation? Do you want to put more toward your debt? Do you need it to build that emergency savings account? If you’ve already established where this money will go, then it’s not as tempting to spend that little bit of extra on something you don’t need right now.
- Don’t just look at the numbers, decide what you will do about them. This is a tough one. When you overspend on your budget or when you didn’t have extra to pay down a debt, it can quickly become discouraging. You might even think, “what’s the point?!” When this happens, and it will, take a breath and dig into whether there is anything you can change.
Even if it’s just for a few months, you might consider small sacrifices to help give you a jump start. Maybe you commit to no cable or streaming services for 6 months. Or, maybe you change your phone bill to a cheaper option for a while. Or, maybe you start shopping around for cheaper car or home insurance. You might be surprised at the money you could save with even small changes. The point is to take action and not stay in a rut of overspending. Remember, you don’t want to keep accumulating debt, you only want to see it go down.
Notice that we didn’t name this article the “5 EASY Steps to Take Back Control of Your Money”. We know it’s not easy, but we firmly believe our members can live healthy financial lives when they commit to making healthy (and sometimes hard) financial choices every day.
Want more resources on saving money and paying down debt? Check out these other articles below:
- How to Start Saving Money on a Minimum Wage Paycheck
- How to Rebuild Poor Credit
- 51 Ways to Save Money This Year