How to jump-start your personal finance game and take control of your money today. One of our Inspiration Lab™ Member’s, Elizabeth Peavy Tabor, shares how she found financial health.
I get pretty fired-up when talking about personal finances, specifically when the discussion turns to someone taking control of their finances. Knowing that the potential for MAJOR life change, and total financial freedom, is actually pretty simple feels like a secret that I can’t wait to share.
It might surprise you to learn that while I am passionate about personal finances, I don’t see myself as a “math person.” True story: I passed college Algebra with a cleverly written essay on the back of the final. I am not an accountant or a financial advisor; my passion comes from budgets scribbled on a yellow legal pad and daydreaming of the future, not spreadsheets and pie charts. This sort of enthusiasm has allowed me to lead dozens of people through Dave Ramsey’s Financial Peace University over the years. I have coached these same principles to many friends and neighbors with great success, no matter their personal income level.
More important than these accreditations, are my day-to-day, real life ones:
My husband and I rarely fight about money. We don’t own or use credit cards. We have an emergency fund that takes the “oh $h!t” money moments out of life.
Whether you are caught in the paycheck-to paycheck rut, or are just ready for a sense of financial freedom, here are some easy tips to jump-start your journey!
Decide that debt is DUMB
You can’t borrow your way to wealth, and you can’t make a plan for truly winning with your money until you understand that your debt is suffocating you. Payments you are making to lenders should be going to your pocket. While becoming debt free is a journey that takes time, dedication, and most importantly, momentum, there is one thing that can happen TODAY: Make the decision to STOP borrowing more money. Realize that every time you swipe a credit card, you are lying to yourself about what you can afford. If you are thinking about your airline points, emergencies, or credit card rewards right now, congratulations, you have been conned by the marketing Gods of Visa and AMEX. You need to break that spell. You must realize that whatever you are using that credit card for can be covered in either your monthly spending plan or your emergency fund (more on both later!). Cut up the cards today, and make a decision to operate your life without debt weighing you down.
If you want to start your debt free journey, here is a great way to start. Watch Dave Ramsey’s full lesson on debt, his snowball plan, and the intensity required to become debt free. Long, but life changing! 2. My money works for ME
Next is a simple mindset thing. I picture my money working FOR ME. I am the one who decides where it goes each month, not the other way around. This is the control aspect. Picture every dollar you have as a little army soldier, and each month you’re putting them in their place to go to battle for you. Some months may be major savings months, some months you may make extra purchases, but either way you are telling your money where to go, not wondering where it went. Allocate every dollar you get to a specific purpose or purchase. No more gray area of “what happened to that last $200?!” Instead of that money getting washed out in frivolous purchases you can’t put your finger on, give that same sum a specific job: an extra car payment, a killer gift for a loved one, etc. Once you start to whip your dollars into shape, you’ll find a great sense of control and momentum with your money. This is what Dave calls “happening to your money, instead of your money happening to you.”
3. A budget is just a SPENDING PLAN
And while we are talking about allocating dollars...stop looking at a budget as a cramp in your lifestyle and start looking at it as a SPENDING plan. This was a game changer for me. A budget is so easy y’all, and when you make one, you get to decide where and how to spend your money.
Here’s a quick 101 budget example:
Take the total amount of money you make in a 30 day period and look at that lump sum as your army. (If your income varies month-to-month, you are not getting out of this activity. Use the average you make each month, and be conservative with the number.)
Next list out EVERY single thing you’ll need to use that army for in a one month period. Write out every bill, debt, and lifestyle category you are obligated to in a 30 day timeframe. I am talking gas, food, entertainment, pharmacy, insurance, ALL of it. Then jot down the number you think you will spend beside each item. Some items you should know exactly, because they are your recurring bills. The other categories you’ll have to estimate at first. This is where it gets real. For starters, if you are out of money halfway down the page, go back and adjust a category to a more—ahem—realistic number. (Obviously, adjust in a category that isn’t a fixed expense. We’re looking at you “entertainment” category.)
Knowing how much money I actually have in each category completely frees me up to spend happily and guilt free. If I have $100 for fun money, I can spend it at T.J.Maxx without worrying if it will come back to bite me. If we are having a tighter month and I only have $50 in that fund, I hold onto it for when it really needs to count.
While the spending plan is empowering, it can also be alarming. If you find there’s not much money left over after your main expenses are paid, or worse, you find that your core expenditures are more than your take home, then obviously something is out of whack. That’s OK! Be proud of yourself for doing the hard work to dig in and uncover this problem. SO many people bury their head in the sand and let money fly in and out of their hands without a firm grasp of what’s what. Knowing exactly where things go right and wrong means you are in control from this point forward.
4. Break the Cycle of Crisis Mode
You know how Murphy’s Law always shows up on your worst weeks? (By the way, that’s Murphy’s job, and he is very good at it.) You are just a few days away from payday and your car alternator goes out or an unexpected expense hits your household right at Christmas. Without funds set aside to handle these headaches, an annoying occurrence becomes a total setback. You dip into your paycheck, which is probably already allocated for something equally important, or worse, you go into debt over it. Well guess what, you can completely avoid “I can’t believe this happened to me” syndrome with an emergency fund. Set aside $1000 specifically for when things go wrong. And note: I said WHEN, not if.
These funds should be in their own separate account, not intermingled with your regular savings. It should be labeled in your online banking as Emergency Fund. This step is critical to gaining control over your money and your LIFE. It will also be the real life safety net that you were just claiming your credit card provided. Here’s the key, this step must be done quickly! This is not one of those long term goals; this is a sell-stuff-on-Facebook MarketPlace and scramble to get your hands on $1000 quickly. Once you have this money set aside, you’ll have a barrier between you and that inevitable “oh sh!t moment.” It’s important to remember that your emergency fund will eb and flow. There will be times when it dips down to next to nothing, and that’s OK! Work to boost it back up. And instead of stressing that you’ve used all of your emergency fund, BE PROUD you had it and didn’t have to go into debt over it.
Here’s the last point for today, and it’s a biggie. If you are married and your finances are combined, both of you have to view your plan for money the same way. Neither one of you has permission to “check out” and relinquish this stuff to the other. That’s not to say one of you can’t handle the reigns, but you both have to know where you’re going.
You also have to view each other as an equal partner when it comes to making financial decisions, no matter who brings home more money or who stays home with the kids. The number one reason for divorce in this country is money problems; so hear me now, the sooner you two can get on the same page, the sooner you can save yourself from consistent money fights. Have budget meetings every month, where you both decide together what each category in your spending plan looks like. It may be rocky at first, but you will get good at these meetings. They can even get fun! Fantasize together about what you will do with the extra money once you aren’t paying back Visa. Goal plan and reward yourselves when you hit your goals. If you can conquer finances together, you will be much better equipped for everything else that life (and Murphy) throws your way.
Remember, when it comes to financial freedom, you are the one calling the shots. Get out of the victim mentality with a healthy funded emergency fund, and make an aggressive plan to get and stay out of debt. And if you are married, by all means do these things with your partner, because two people rowing a boat have to be rowing in the same direction to get anywhere.
If you have any questions, or need any budget advice, you can reach out to me directly. If you want to know more about Financial Peace University, which I can’t recommend enough, there are classes in our area offered all of the time! Just visit DaveRamsey.com and search local groups!