Ready to Start Your Journey To Financial Independence?
If you’re anything like me you’ve had to figure out this personal finance stuff on your own.
Luckily for you, I have a passion for finance and have been studying and experimenting with various strategies and best practices for over a decade, so hopefully, I can save you some time.
We all start our journey at different points on the path but I’ve highlighted below what I think are the top 3 areas where most of us need help.
Choose your own adventure below.
Get Out Of Debt
The first step to achieving financial freedom is to eliminate your debt.
To get rid of your debt you need to know where your money is going and where you want it to go.
Step 1: Track Your Spending
You’ll never learn to master your money if you don’t know what you’re spending it on. So before you do anything else, start keeping track of every penny you spend.
I recommend using YNAB to make this easier. You can link your accounts and categorize your spending, but I strongly suggest making a habit of manually recording your expenses at the time of purchase and not relying on automated account syncing.
It may seem tedious at first, but charges can take days to clear which means your budget is NOT giving you an accurate picture of your finances if you’re not manually entering your spending.
Step 2: Plan Your Spending
While tracking your spending can be an eye-opening experience, if it’s all you ever do, you’re still letting your money tell you what it did instead of you telling it what to do. This is why a budget is so important.
A budget isn’t meant to be restrictive, it’s meant to be liberating.
A budget is simply a blueprint to align your spending with your values. You determine your values, prioritize your spending accordingly and then make a budget telling your money what you want it to do.
Step 3: Spend Less Than You Earn
The trick to getting out of debt, staying out of debt and accumulating wealth is simple: spend less than you earn.
It’s not as easy as it sounds, but once you start tracking and prioritizing your spending, it should get easier to gradually increase the gap between your expenses and your income.
Once you start building up some cash reserves by spending less than you earn, you’ll find you have more to contribute toward your debt and other goals.
Step 4: Pay Your Debt
Once you’re cash flow positive you’ll have more money to put toward debt repayment. But you’ll do well to have a plan for it.
There are different approaches to debt repayment, but having a tool that breaks things down for you can be really helpful. I used Undebt.it to help us make our debt repayment plan.
You simply enter in your debts and adjust your payment amounts and methods to see what will work best for you.
Paying off debt isn’t easy and it isn’t usually quick, but by combining the power of YNAB and Undebt.it, at least you’ll finally be the master of your money.
Save More Money
Once you’re tracking and prioritizing your spending, you’re ready to start saving faster than ever.
The best way to stick to your new budget and work toward your money goals is to make some quick wins and a plan for potential spending traps in the future.
Step 1: Find Your Quick Wins
Saving money can seem like a difficult task when you’re thinking of your big, fixed expenses like housing or debt payments. But if you focus on quick wins, it can help you build momentum and keep you encouraged as you get started.
Analyze Your Spending
If you haven’t analyzed your spending yet, this is the best way to start saving money.
Look through your latest purchases and find any that don’t align with your values.
When my family started getting serious about saving money, the first place I looked to was iTunes, PayPal and Amazon to see what recurring charges we were making and which ones could be eliminated.
You might be surprised what apps and products you subscribe to, not to mention how quickly they can all add up.
Downsize What You Keep
There may be expenses you decide to keep but that you can still save money on.
A lot of people cut the cord and drop their cable or satellite, but our family decided instead of completely dropping DirecTV, we would reduce our package and see if they had any discounts. We managed to cut our bill by over $100 a month!
I was able to get a similarly good deal when I attempted to cancel SiriusXM. Sometimes, a simple phone call can save you hundreds.
As a side note, if you’re phone-call averse like me (I would literally go hungry instead of calling for take-out in college) or can’t muster the time or effort to make a call, check if the company’s website has a chat feature.
I was recently able to cancel a subscription channel we had with DirecTV via their chat without having to wait on hold or get pitched a bunch of other “deals.”
Step 2: Start Your Sinking/Emergency Funds
This may not seem like much of a savings tip, but sinking funds will help you a couple of different ways.
First, by being prepared for the unexpected but inevitable expenses that might surprise you, you won’t risk resorting to debt to pay them.
Second, actively setting money aside into sinking funds means you’ll be intentionally spending less and aligning your priorities to match your values.
Third, by reducing your expenses now, you’re reducing your cost of living in the future, making your savings go that much farther.
Step 3: Get Creative
There is only so much spending you can cut, so the final trick is to be more creative when it comes time to spend.
Obviously, you can take that literally and make something or refurbish things to avoid buying new.
But apart from physical creativity, there are some buying hacks you can implement to save little bits here and there that add up over time.
You may already be shopping sales and using paper coupons, but don’t forget that most stores have websites and apps now that offer member-only discounts and coupons as well.
Also, if you’re shopping online there are a number of tools that can help save you money, like rebate sites and browser extensions that provide you with discounts.
My post, How To Save When You Spend gives you a ton of ideas and tools to help in this area.
Earn More Money
While saving money is important for paying off debt and building your wealth, there’s only so much you can cut sometimes.
Finding ways to earn extra money can have a massive impact on your financial goals.
Here are a few ideas to get you started.
Idea #1: Sell Your Stuff
This is probably the fastest way to make some extra money. Simply survey your surroundings and see what you’re willing to part with.
There are a number of outlets you can use for the actual sales process. Craigslist, eBay, Facebook, yard sales and classified listings are several you can look into.
Idea #2: Side Hustles
Side hustles are a great way to bring in extra money by harnessing your talents and passions without much risk.
We all have different interests and abilities, so I can’t tell you what side hustle will be perfect for you, but I’ve listed a few general ones below to help you start brainstorming.