When it comes to discussing personal finances, most of us avoid the topic. Its intimidating and uncomfortable and for some embarrassing; being transparent about not being successful at managing the money we have and in some cases don’t have is depressing. Of course we learn basic practices and principles about money and its value, but, we aren’t provided an in depth education or exposed to any real knowledge on the true importance of managing our finances to actually make any smart decisions and put the necessary measures in place to prosper. By the time we are able to truly grasp the concept, we’ve already accumulated so much debt and regret adding to our already present financial insecurities.
We place blame on our parents for not taking responsibility to teach basic skills like balancing a checkbook or creating a monthly budget. While we may not have been showed the ropes and best practices we are still personally responsible for our own irresponsibilities. Taking accountability for our own financial mishaps starts with admitting that we’ve allowed ourselves to believe the lies and excuses we’ve created not to have to face the damage done. As much as we’d like for things to work themselves out, we have to prioritize financial literacy if we want to achieve access to a lifestyle free of any financial chaos.
I’ve heard so many excuses from family members and friends as to why they have the habits when talking about finances. What I always suggest to them is to take a deeper dive in what their current finances look like and what habits they should in fact re-evaluate to get back on the right path. Personally, at the start of the year I analyze the areas I know will need the most attention and prioritize accordingly. I also check on my savings, determine what went in and what may not have made it on account of some unexpected occurrences and obligations and irresponsible spending.
Since its spring and most of us are spring cleaning our closets making room for new fresh pieces, we should also be taking time to spring clean financially. Getting into this habit will make a lot of difference. Here is some advice to help you to dust off your finances:
Decrease Debt
Make a plan to repay any debt you may have and stick to it. Being weighed down by debt is discouraging and the longer repayment is pushed off, the greater the balance and burden becomes. So, be intentional with gaining control over the debt you do have. Be responsible when choosing credit cards, pay close attention to when introductory promotions expire and what the expected interest rate will be following. Make sure your student loan and mortgage payments are on time and when possible throw in extra. If possible, look into transferring current credit card debt to an account with a lower interest rate.
Essentials vs Non Essentials
Know the difference between essential and non essential expenses. Getting intentional about your spending will help save you from needing bailouts in the form of loans or opening additional lines of credit. Transportation costs (fuel, public transportation fees, car notes, insurance, maintenance), Medical expenses (non cosmetic), Utilities, necessary Food and Household items are all essential expenses. If it does not fall within one of these categories, it is considered a non-essential expense. These would be things like trips to Starbucks, Retail Therapy and Excessive Dining.
Reduce Bills
Re-eveluate your monthly obligations and spending habits. It may not be ideal to completely eliminate these but you may be able to reduce them. Meal delivery, cable, monthly subscriptions, (gym, music outlets & tv streaming) that don’t get much use deserve a second look. These may be costing you an emergency fund, saving for a down payment on a new car or home or keeping you further form the lavish vacation you’ve been wanting to take. Free up some money by calling and asking for better rates. I don’t have cable, but annually I make a call to my parent’s cable provider and request the lowest promotion offer their running. Don’t be afraid to do the same, companies want you to remain a loyal customer and are always running specials for new and existing contracts.
SAVE!
Life in unpredictable! Saving for unexpected times will reduce so much stress especially in times of uncertainty and hardship. How much you should save will of course depend on the your total take home pay and expenses, but at the least, you should be intent on saving 20% of your monthly income. If this is not attainable, try to put away no less than 5% instead. The goal is to accumulate 3-6 months of expenses for any unplanned and unforceable forces.
So much of our issue is not that we don’t make enough to support our lifestyle, its that we’ve created a lifestyle that does not fit in within our means. We irresponsibly spend more than we make creating other problems. Your future is a long term investment. Developing better habits will set you up to leverage time, investments and other resources. Make responsible choices, stay consistent and reduce impulse buys. Make a financial commitment even if that means starting small.