Do not let your finances cause you stress any longer; it is time to take your life back by putting these five steps toward financial freedom to work for you. Please note that this activity will likely take you some time; feel free to spread it out over several days.
While this first step may seem self-explanatory, many individuals do not know what their net pay is for one month. If you are an employee, then determining your net pay is as easy as looking at your last pay stub. Self-employed individuals should look at their last 2 years of income and then determine what their monthly average has been in order to determine their projected cash flow. Once you see how much money you have to work with, you can then use these figures to determine what your monthly household budget should be.
The second step in overhauling your finances is to determine what your monthly expenses are. Make a list of each of your bills and what the required payments are for each one. Do not forget to include how much you spend on gas, groceries, medical supplies, pet supplies, clothing, entertainment items and eating out. It is important that you are honest with yourself during this step, as listing all of the items you spend money on is key to gaining control of your finances.
Now that you have done the research it is time to create a budget using all of the information you collected. Take all of the expenses you listed in Step 2 and create a line item for each in a basic spreadsheet. You should also create a line item for the items that require a regular contribution to savings but do not occur regularly, such as tax bills, car repairs, vacations, home repairs, insurance bills, emergency pet bills, etc. Making small contributions to these funds over time will help ensure that you have funds available when an emergency occurs. Subtract all of your expenses from your income to determine your budget surplus or deficit. If a deficit occurs, you must recalculate your numbers until you can successfully balance your monthly budget.
Now that you have a monthly budget calculated it is time to start paying down your debt so you can free up more of your money for savings. Start your crusade against debt by paying a little extra toward your smallest credit card or loan. After you pay off your smallest source of debt, roll the monthly payment amount into your next largest payment. Continue this snowball effect until all of your debts have been satisfied. Though this may sound simple, it is crucial that you do not allow yourself to become discouraged if you have months where extra money cannot be paid toward your debts due to unplanned expenses.
The key to true financial control is to eliminate the need to borrow money from financial institutions. By building a savings account you can easily achieve this goal and have the financial freedom you deserve. You should ideally save 20% of your net income every month. If you do not make enough money to cover your expenses and contribute to a savings account, then there are some things you can do to increase your income. The most obvious solution is to get a second job. While this may not seem feasible at first, placing an ad for basic lawn care, babysitting, housecleaning, organizing or moving services on a community site could lead to a lucrative side job that provides both flexible hours and reliable income.
Changing your financial course takes hard work, a steadfast attitude, and patience. You did not create your current financial situation overnight, so you cannot expect yourself to be able to remedy it that quick. There may be times when saving money is not possible or when an emergency threatens to steal your entire savings; these are all a part of life and are things you must learn to live with. By bettering your financial health, you can make living with life’s small setbacks easier and more manageable than you ever thought possible.