Take Control of Your Finances (Part 1)
By Shannon M. Medisky
It’s easy to fall into the trap of thinking that bringing more money in will solve your financial struggles, but it’s important to remember that those supposed “added” funds come with their own price tag. Make more money, you’ll pay more in taxes. Work more hours to bring in more pay, you lose valuable time you could be using to help you save or better allocate what you already have. Don’t forget, too, that if you have children, you’ll likely have to pay more money in daycare costs. Need I say more? Stop struggling and take control using these six steps.
1. Identify and itemize monthly expenses. This is admittedly the most difficult step. While it may be easy to sit down and create a list of ongoing bills, it can be an excruciating experience to come clean about personal spending habits. If you regularly purchase a cup of Joe (or a double tall macchiato), it is an expense and it must be included. The goal of this step is not humiliate or create guilt. It’s simply to create an accurate record of where all of your money is going every month. Remember, you need be the only person whoever sees this record, so ‘fess up now to find more money later.
2. Compare to monthly incoming funds. Be honest with yourself and only record money what you receive on a regular basis. Remember, the goal is to plan and spend smarter, not work harder (or more). Once you’ve figured out exactly how much you bring in each month (after taxes and any necessary medical deductions), you’ll want to subtract the total dollar amount figured in step #1. If you have money left over, great, keep reading to learn ways to keep even more of your hard earned money. If you find a negative number staring back at you, take a deep breath and realize you’re on the road to remedying the situation pronto!
3. Identify fixed versus fluctuating expenses. There are likely many expenses you have little to no control over: your housing cost, car payment (if you have one) and your phone bill to name a few. Separate your monthly expenses identified in step #1 into 2 lists. Label one “fixed” and the other “fluctuating.” The expenses in the “fixed” lists are the costs that must get paid each month and are predictable. The expenses in the “fluctuating” list are the costs over which you have at least some amount of control. This is also the place you will likely find much of the funds that are simply slipping away form you each month.
4. Prioritize expenses. I hate the term “needs versus wants.” Well, duh, I could give up things I simply want to save money, but I’m a firm believer that quality of life counts, too. So rather than beating yourself up for things you want, prioritize the expenses that fluctuate. If you simply can’t give up your spa manicures, don’t. Instead cut back to once every two weeks. Love the specialty drinks your favorite barista whips up? Change the size you order or treat yourself every other day rather than daily. The little niceties of life do add up. Prioritize the ones that truly make your life easier or more enjoyable and make concessions in other areas to help pay for them. You’ll reap financial rewards and be able to savor them without guilt.
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