We are continuing this week to look at specific actions one can take to organize their finances. These are the steps one couple took to pay off $52,000 debt in seven months – which I find impressive, and based on feedback I’ve received from last week’s newsletter where I introduced the nine steps, others found their accomplishment impressive also.
Others also chimed in on steps one through three, with one mom writing to tell me how having a family goal (Step 1) to completely renovate their kitchen had opened up great discussions about finances with her teenagers, and made making choices (Step 2) and saving for the renovation easier. Another, who works in the personal financial world, wrote to say that she so often sees people try to create a budget before they track and record what they are currently spending (Step 3.) She stressed how important it is to know your fixed costs first, before attempting to make changes. Good advice.
Ready for tips four through six? Here they are:
4) Keep it Simple: we have a tendency to over-complicate many things in life. But another truth is that what is simple to one can be extremely difficult for another – so there is no one perfect tool or system for all. One simple method is to put money in your bank account and have a portion automatically transferred into savings. Whatever is left over is what you spend. And the famous get-out-of-debt- advisor, Dave Ramsey, teaches people to manage their money using five paper envelopes. I know people who have undertaken this method and yes, it is simple – not necessarily easy – but they’ve all loved the results.
5) Plan for the Unexpected: they always have a way of showing up in life, don’t they? These provide us with an oxymoron – they can be unexpected, yet they are predictable, i.e. new tires, household appliances and dental bills to name a few (not to mention taxes!) Setting aside money each month for these types of expenses may prevent you from having to borrow money to cover them.
6) Avoid Temptation: improving your financial health is just like improving your physical health: it requires focus. Focus requires discipline, which in turn helps you to develop habits that drive your success. When you focus on developing successful habits (financial or physical) it often leads to increased confidence and motivation.
There you have it, steps four through six. What do you think? Next week I look forward to sharing steps seven through nine.
I hope that even if you’re not currently working through the steps, you are thinking more deliberately and strategically about your finances. When your financial house is in order you will have more emotional freedom and physical energy to focus on your vision and what you want to create.